Pre-qualification vs. Preapproval

Your loan officer will put together a package that includes a loan application, credit report, income and asset information and supporting documentation. These documents are then reviewed by a lender who issues a letter conditionally approving or denying the loan.

What's The Difference?

o A pre-qualification is simply a loan agent's opinion that you will be able to obtain financing. Information is not verified, so a formal approval is not issued.

o A preapproval means the lender puts the application through a rigorous process. Buyers who are preapproved are taken more seriously than their pre-qualified counterparts.

Benefits of preapproval:

o Helps you avoid the disappointment of falling in love with a home you can't afford.

o Ensures your real estate agent is looking for the right home for you.

o Usually can close loan more quickly. Once you submit your credit package, most of the legwork has already been done.

o Gives you an edge in a situation where multiple offers been made on a house.

Remember, neither preapproval nor pre-qualification is an absolute loan commitment. Your lender must still assess property appraisals, verify information, and in many cases, verify credit before funding the loan.