Wondering if you should be Pre-approved or Pre-qualified for a loan before you buy? Wonder no more!
When you go into a real estate agent’s office for your consultation, your agent may insist that you bring a preapproval with you. Make sure you have a preapproval instead of a prequalification. They sound pretty much like the same thing, right?
There’s a huge difference between the two.
A pre-approval is what you get when you have spoken with the mortgage broker, they have analyzed your information, check out your credit score, go over your tax returns, looked at your investment portfolio; they have scrutinized absolutely everything and determined they can preapprove you for a loan.
A prequalification, on the other hand, is what you get when you speak with a mortgage broker, but you haven’t given them your investment portfolio, bank statements, or tax returns. You simply have a conversation and they say, “You may possibly be approved for a loan of this amount.” Essentially, it’s not worth the paper it’s written on.
Sellers often don’t respond to an offer that doesn’t have a preapproval attached to it … unless it’s cash. Of course, that’s a totally different thing!
Why? Imagine you’ve written an offer on a property and the other party has been preapproved, but you’ve only been prequalified. They’ll likely respond to your offer, but only to use it as leverage to get the other offer higher.
Now, imagine this: you’re selling your home, it’s been in escrow for 3½ weeks, and you find out the buyer can’t get the loan. Not only have you wasted weeks of your life, but the buyer pool doesn’t understand why it’s still on the market. The next offer you receive is going to be lower. You’ve now wasted time AND money!
As you can see, there’s no need to waste your time on a prequalification. Spend the extra time on a full pre-approval. The last thing you want is to lose out on the home of your dreams!