Updated from our Mortgage and Financing Archives. Originally posted in March 2009
Pre-qualification is the starting point in your search for mortgage financing. A quick snapshot is taken which includes income, existing debt, savings, length of employment, etc. All of these factors will then be analyzed to determine your loan eligibility.
Pre-approval is written documentation that shows you have the support of a lender who is willing to finance you. It means an underwriter has reviewed your loan application. Based on your income, debt ratio and savings, the underwriter provides the dollar amount you are eligible to borrow. Now you can shop around for houses that fit into that loan amount category.
Here is the nice thing about the pre-approval: It gives you the leverage to shop as a cash buyer!
- With a pre-approval in hand, you now have the power to negotiate.
- The seller will take your offer much more seriously knowing you are already approved by a lender.
- Pre-approval can also shorten the time it takes to close, making even a lower bid attractive to sellers who are seeking to move quickly.
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