When you are starting out on your home buying journey, there are many terms and concepts to learn such as earnest money to closing costs. There is a lot to take in, in a fairly short amount of time so it is important to learn the difference between pre-qualification and pre-approval before you seek your mortgage.

It is always important to bring a strong offer to the negotiating table when it comes to real estate, even more vital in the current market where the inventory is lacking and the buyers are plenty. If you are in a multiple offer situation especially, the sellers will weigh the various offers to decide which offer what they need to sell their home and if it is a strong offer.

A strong offer is one that will have as many obstacles (called contingencies) removed. For example, if you need to sell your home before purchasing another, you will make a contingent offer based on your home selling. Some sellers might find this to be a weaker offer. A weak offer does not mean the offer is bad, rather its an offer that could look tricky to get to the closing table. The risk vs reward could be too high, and why having the right type of mortgage application status plays in your favor.

When you meet with a lender for the first time, they generally ask some probing questions about your income and assets, as well as your expenses and credit file. They aren’t just being nosy, they are trying to find out how much you can qualify for and what programs might be the best fit for your financial picture. Sometimes lenders may even send you elsewhere because their banks or partner lending institutions can’t help you, but they can often produce a pre-qualification letter.

Pre-qualification letters go largely on your word about your income and expenses and is not a promise to lend. It is simply a hypothetical among a list of hypotheticals. If you in fact make this much money, your credit is assumed, the house you choose is in line with these parameters and rates don’t change drastically, you should be able to purchase the home. You can see how a pre-qualification might just be risky for a seller to hang their hat on.

A pre-approval on the other hand shows that you have gone through the additional steps to reach the highest amount of mortgage approval you can get without having a house secured. The house itself can also factor into the final approval, but that depends on the loan program. For a pre-approval, the extra steps include providing income documents, permission for the lender to pull a credit report and providing details on any assets or liabilities you hold that aren’t included in the credit file.

A pre-approval isn’t instant, it requires more review and you’ll need to chose a loan program to be approved for. Doing all this extra work upfront shows a seller that you are already putting in a lot of effort to ensure that you will close when the day comes and that you’re eager to move the process along as quickly as possible. That is a strong offer a seller wants to see.

We are familiar with many lenders that offer different loan programs and would be happy to connect you. The lender can mean a lot to your offers on a new home so it is important you choose someone you are comfortable with.