A pre-qualification
is normally issued by a loan officer, who, after
interviewing you, determines the dollar value of a
loan you can be approved for. However, loan officers
do not make the final approval, so a
pre-qualification is not a commitment to lend. After
the loan officer determines that you pre-qualify,
he/she then issues you a pre-qualification letter.
This pre-qualification letter is used when you are
making an offer on a property. The pre-qualification
letter indicates to the seller that you are
qualified to purchase the house you are making an
offer on.
Pre-approval is a
step above pre-qualification. Pre-approval involves
verifying your credit, down payment, employment
history, etc. Your loan application is submitted to
an underwriter and a decision is made regarding your
loan application. If your loan is pre-approved, you
are then issued a pre-approval certificate. Getting
your loan pre-approved allows you to close very
quickly when you do find a house. A pre-approval can
help you negotiate a better price with the seller,
since being pre-approved is very close to having
cash in the bank to pay for the house!
