In one of my posts I had discussed the importance of getting pre-approved for a home loan ASAP if you are considering purchasing a home. Now I want to explain the difference between the terms “pre-approved” versus “pre-qualified.” The difference in terms is meaningful to both buyers and those wishing to sell their home.
A “pre-qualification” simply means that the buyer has had a verbal discussion with a loan officer regarding how much money you make. “Pre-approved” means that the loan officer has actually received supporting documentation regarding your assets, and has taken loan application on the buyer’s behalf, pulled a credit report, etc., and is approved for a loan based on these factors.
When you are looking to purchase real estate, a buyer’s agent is going to be hesitant about representing you if you have not gotten fully pre-approved.
When you do find the right home to buy and want to write an offer on it, the Realtor representing the seller (Listing Agent) may advise the seller to not accept your offer until you’ve gotten fully pre-approved. A seller will not want to take their home off the market, only to have it go back on the market a week later for a buyer that does not qualify. This damages the seller, because many people assume that something went wrong with a home inspection. This means that another buyer can come along and buy the house before you’ve gotten fully approved for your home loan.
The distinction is particularly important in multiple offer situations. Even if you write an offer on a home that is well above another offer, the fact that the buyer is not fully pre-approved discredits the entire offer.
For recommendations of mortgage brokers that past clients have had good experiences with, check my resources page.