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Pre-Qualification vs Pre-Approval: A Huge Difference!


When you initially set out to purchase a new home, the real estate agent(s) and home seller will want to know you can actually afford the home. Frankly, you should want to know too. If you can’t really afford it, you will be wasting everyone’s time, including your own.

Most Real Estate Agents will demand that you get pre-approved for a mortgage loan before they will begin to show you potential properties. (Not just pre-qualified)! A pre-approval shows what you can qualify for so that the Real Estate agent will only show you appropriate homes in your price range. It also shows the agent(s) and home sellers you are committed to purchasing. A pre-approval gives the seller reasonable assurance that you can purchase their home and makes it more likely they will accept your offer.

Pre-qualification means that a lender has evaluated information and decided that you PROBABLY will be eligible for a loan up to a certain amount. But here’s the rub. Most often, a pre-qualification letter is an approximation—not a promise—based solely upon information you give the lender and the Loan Officer’s evaluation of that information. This might be a mere 10-minute process. “The analysis is based on the information that you have provided” says David Reiss, a professor at the Brooklyn Law School and a real estate law expert quoted on “It may not take into account your current credit report, and it does not look past the verbal statements you have made about your income, assets and liabilities.” A pre-qualification may be helpful if you are totally unaware of your current financial ability to purchase a home and you are just beginning the homebuying process but it will not carry weight in submitting an offer to purchase. Some professionals believe a pre-qualification is virtually useless. A pre-qualification is quick and easy, but non-committal! It is not as robust as a pre-approval.

A Pre-Approval letter and certification are the real deal! It is a written conditional statement from MortgageOne that you qualify for a specific mortgage amount based upon review of your financial information. This includes a credit report with your credit scores, paystubs, bank statements, salary, assets and obligations. Furthermore, we run your file through our automated underwriting system to make sure your information meets mortgage guidelines.

Pre-Approval means your final approval is contingent only on the appraisal and the title work of the home you choose, providing that no changes to your financial picture occur before closing.

A pre-approval shows the Seller you are committed, serious and equipped to buy their home. It gives you an edge over other prospective buyers who are not pre-approved. A pre-approval is as close to a cash buyer as you can be and gives you a huge advantage in a competitive market. In fact, pre-approvals with clean strong contracts can compete against all-cash offers.

AFTER YOUR PRE-APPROVAL: Your lender is required to re-run your credit report prior to funding your loan and re-verify you are still employed with the company on your application. Therefore, it is essential that you do not cause your credit score to go down during the loan process if you were on the bubble to begin with.
• Do continue to pay all your bills on time
• Continue saving
• Don’t make any big purchases
• Don’t incur any new debt…new credit cards etc.
• Don’t go buy your new furniture, washer/dryer etc. until after closing
• Don’t change your job!
• Don’t cosign on any loan

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