Many home buyers make the mistake of believing that being pre-qualified and pre-approved for a home loan are the same.
In fact, there are vital distinctions between them and it's important to understand why pre-approval is so preferable.
Pre-qualification is nothing more than a lender's estimate of an amount you might reasonably be approved for, using some information you've supplied.
Pre-approval, on the other hand, is a lender's confirmation that, unless your situation changes, you are able to borrow a certain amount for a mortgage.
Naturally, pre-approval involves a far more forensic look at your finances and you will have to provide the lender with detailed information, including recent tax returns, income, investments, and savings. There will also be a full credit check.
It makes sense to think of pre-qualification as a quick means of establishing what you might be able to borrow. Pre-approval, on the other hand, is much more useful to you.
Sellers inevitably take offers from pre-approved buyers more seriously because they have confirmation of someone being able to afford their home. This can be especially vital when competitive bids are placed.
Having a pre-approval in hand also means that your entire home buying process becomes more streamlined, as there are no detailed mortgage application procedures to go through, once you have decided on the right home.
We hope this helps to explain an important difference. We have excellent connections with top local home loan professionals, so please don't hesitate to contact us for more details.
Kind regards
Aaron Novello