We get asked this often by our real estate buyers and sellers. From the sellers, they want to know the difference because those submitting offers, with their lenders "approval" letter, differ vastly.
But the breakdown of the pre approval versus pre qualification is this.
Pre Qualification, in Slang could be called a Pre Qual letter. These are typically given with only a preliminary research done on the applicant. The Applicant is the one applying for the home loan. There could be more than one applicant.
The more reputable lenders may give an estimate over the phone, after hearing the applicants financials. However, to get anything in writing, even a pre qualification letter, that requires more documentation to be provided by the person applying for the loan.
The more established lenders may take a few days, after receiving the Tax returns, the paycheck stubs, any court judgement paperwork and all other associated required paperwork, in order to get a pre qualification letter produced.
With pre approval, they have already completed the process, verifying all information obtained from the applicant and this puts the buyer or refinancer in a much stronger position with the lender.
There is a third type of approval. This is known as full Underwriter Approval. They have taken all of the borrowers paperwork to the underwriter aka, the bean counter,(no offence intended), and they have looked over the file, verifying all components, and have Blessed the loan. This is the strongest position to be in as a real estate buyer or a person seeking to refinance.
Reach out to us when you are ready and feel free to get on our YouTube First Time Buyers playlist that will give you other First time or savvy real estate buyer tips when it comes to real estate dealings.