The Difference Between Pre-Qualification and Pre-Approval


    There is a big difference between pre-qualification and pre-approval. Here’s what each means for buyers.
     
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    I’m here today with Matt Wilkerson, a branch manager at @Mortgage, and he’ll tell us about the differences between pre-qualification and pre-approval.

    The biggest misconception clients have is that the pre-qualification letter is the same as a pre-approval letter, but that’s simply not true.

    The pre-qualification letter indicates that you’ve spoken with a lender, but they haven’t checked your credit or sent your loan through an automated underwriting system. It basically means that, based on information you provided your lender, you would likely be approved for a mortgage loan.

    A pre-approval means your credit has been checked and the automated underwriting system has made its decision. It’s a more thorough evaluation and essentially guarantees the likelihood of getting a loan.

     

    If you find the right lender, you may not even need
    a pre-qualification in the first place.

     

    A pre-approval means your credit has been checked and the automated underwriting system has made its decision. It’s a more thorough evaluation and essentially guarantees the likelihood of getting a loan.

    While the pre-approval letter holds more weight, lenders can quickly pre-qualify you if you find the perfect home and need to make a fast offer. In fact, Matt says he can get buyers a pre-approval letter within a day, so if you find the right lender, you may not even need a pre-qualification in the first place.

    In his years of experience, Matt has seen the biggest mistakes that beleaguer some buyers, and he has some advice to help you avoid them:

    • Don’t switch jobs in the middle of a transaction. At this point, they’ve already calculated your income, and any changes could impact the process.
    • Avoid major purchases. Lenders are looking at your ability to repay the loan. If you go out and buy a car or a bunch of furniture, it could impact your approval.
    • Don’t move assets around. If you’re moving money to and from accounts, your lender now needs a paper trail to show where the money is coming from and going to. Keep your money in your account.

    I’d like to thank Matt for giving us some insight into what pre-approval and pre-qualification letters mean for buyers. You can contact him at (309) 408-0708 or matthewwilkerson@atmortgage.net. If you have any questions about the mortgage process or would like to learn more, feel free to reach out to us. We look forward to hearing from you soon.

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