The Difference between Pre-Qualification Letter and Pre-Approval Letter

Pre-Qualification

An initial evaluation of the credit worthiness of a potential borrower that is used to determine the estimated amount that the person can afford to borrow. Pre-qualification is a relatively simple and quick process of examining the potential borrower’s income and expenses in order to generate an estimated borrowing range that they would likely be able to repay to the lender.
 

It is important to note that the pre-qualification amount is not a guaranteed amount that would be receive from a financial institution if you applied for a loan but is simply an estimate, which can be used to gain an idea on what a person can afford to purchase. The pre-qualification process doesn’t include a more thorough look into the credit worthiness of the borrower, such as accessing your credit report or score.

Pre-Approval

Pre-approval is a more in-depth assessment of the amount that a person can afford to borrow and is done by a financial institution that will state the maximum amount that it would lend to the borrower. It’s far better to be preapproved for a loan than to be prequalified.
 

Advantages of receiving a pre-approval from lender

Save Time by Looking at the Right Homes

If you are receiving automatic e-mail listings of available homes from your realtor, you can ask her to change the parameters to more tightly encompass the selection of homes that you are qualified to buy. If you’re not receiving e-mails from your agent, ask her to send them to you. Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you’ll save time by checking out homes within your budget.

• Spend More Time Examining the Right Homes

  By decreasing the inventory of homes to those that fit your parameters, you can allot more time to thinking about all the little nuances each home has to offer. Many buyers never move past the price point when sorting out their preferences, but now you can devote your energies to looking at the little things that matter to you most such as whether your dog can jump the 6 ft privacy fence or you can oversee homework while cooking.
• Gain Confidence & Avoid Disappointment
  
When you eventually find the perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You’ll have peace of mind knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not “lose face” with anybody.
• Leverage = Increased Bargaining & Negotiating Power
  
Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that her home is sold. She can take her home off the market and place it into pending status with confidence.
• Enjoy a Faster Closing Period
  
Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals  can be ordered immediately. It’s possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can’t decide which offer to accept. Yours will move to the front if you can accomplish the seller’s need to quickly close.

A mortgage approval is generally the longest contingency to satisfy in a purchase contract, and it is to your advantage to obtain a preapproval letter as soon as you’re ready to begin visiting homes with your realtor. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.

Recommended Lenders

Meredith Thigpen
Asheford Funding
404-849-2024 direct
404.812-3800 office
Click to email: meredith@ashefordfunding.com

Sam Johnson
SunTrust Mortgage
Office: 770.506.5257
Cell: 404.391.9951
Fax: 770.506.2532
Click to email: sam.johnson@suntrust.com

Will Hornsby
Fidelity Bank
(404) 519-6375 direct
Click to email: will.hornsby@lionbank.com

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