Many new real estate agents have some confusion between a pre-qualification and pre-approval lender letters. The norm today is to provide a preapproval letter when sending any offer on a property.
These are two key steps in the mortgage application process. Some people use the terms interchangeably, but there are important differences that every homebuyer should understand. Pre-qualifying is just the first step. It gives you an idea of how large a loan you may qualify for. It’s never a sure thing. Pre-approval is the second step, a conditional commitment to grant you the mortgage.
The pre-qualification process is based on what data the buyer has given to the lender. Most big mortgage companies and banks allow this to be done online kicking out a pre-qualification of what income has been provided. An example is applying for a credit card. You send the application in, but it takes a couple weeks to get your new card. The lender will need to run your credit and buyer needs to submit other financial documents before a pre-approval letter can be issued.
The pre-approval process can take a couple days to a week. It is always best to have your buyers acquire a pre-approval letter to send with any property offer. Many lenders will even offer to call the Listing Agent to confirm the buyers’ strength of their offer.
-Angela Smart 5/2022