Quite a few buyers want to know what the difference between a pre-qualification versus a pre-approval is. Confusing the two can often lead to disappointment for borrowers who believed they were actually pre-approved for a mortgage. To avoid a sticky situation later down the road; we’d like to explain the difference between the two!
Pre-qualification:
Is only based on information stated by the borrower.
Lender grants a pre-qualification without reviewing the clients documentation/application/credit.
It gives the borrower a loose idea of how much they may be eligible to borrow.
Pre-Approval:
Is released after the lender reviews credit and income documentation.
An application must be submitted for review as well as submission into underwriting (automated/manual)
Gives the borrower a more concrete understanding of how much they are eligible to borrow.
The best option is the ask your client to be pre-approved versus pre-qualified with their lender so that all the parties involved in the transaction will not run into any unnecessary confusion/disappointment later down the road!
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