You can either be “pre-qualified” for a mortgage, or “pre-approved.” They sound similar, but they’re actually very different. Let’s make sure you understand the difference and how to leverage that difference to make a stronger offer.
Pre-Qualified
Pre-qualification for a mortgage is an informal evaluation of your financial situation that ends with an estimate of how much your can borrow. It requires very little paperwork…but it also carries very little weight with sellers.
Pre-Approved
Pre-approval for a mortgage is a longer process with more paperwork. You will have to submit tax returns, proof of income, supporting documentation, agreement to have your credit pulled…it takes a little more effort. But at the end of the process, you get a pre-approval letter – an official statement from the lender of how much they are willing to lend you and at what terms.
Sellers take pre-approval much more seriously because a lender has actually agreed, in writing, to lend you money and stated exactly how much.
