Updated: Jun 29, 2022
When you are looking into buying a new home, the terms "pre-approval" and "pre-qualification" get thrown around a lot. Many times these terms are used interchangeably. But the truth is, these terms mean very different things & can affect whether your offer on a new home gets accepted.
So what do they mean? At a very basic level, they are both types of mortgage approvals, and they refer to the steps a lender takes to verify that a client can afford a mortgage. Pre-qualified means that a mortgage lender collects some basic info from you (ie, income, down payment, credit score) to give you a general idea of how much home you can afford. This is usually just self-reported information.
In contrast, being pre-approved is an official step towards getting a mortgage. With pre-approval the mortgage lender has verified the information and officially approved an individual for a mortgage loan amount. Being pre-approved shows that you are not only a serious buyer, but can actually afford the home you are putting an offer on.
It's no surprise then, that when a home seller receives similar offers from a pre-approved buyer versus a pre-qualified buyer, the seller is going to go with the stronger pre-approved buyer.
Buying a home can be overwhelming and a bit confusing. However no need to fret! The Liz Keeps It Real Estate Team is here to answer any and all of your questions. We are your “HOME” resource- from answering market questions, connecting you to a lender, giving you community resource recommendations, to assisting you with achieving your real estate goals. Our team is always here to help!