Pre-Qual vs. Pre-Approval; What’s the Difference?

I would bet that if I asked 100 different buyers what the difference was between a pre-qualification and a pre-approval, I would get close to 100 different answers. So what really is the difference? Which one is better? Who does it come from? What’s the importance of having one vs. the other…let me try to answer your questions?

Pre-Qualification

Let’s start with a pre-qualification (more commonly know as a pre-qual) since majority of loan officers will refer to this. A pre-qual is typically given by a loan officer to a client as the personal qualification for financing. This does not mean that you have been approved for financing or even that you will get financing.

This is actually a common mistake when shopping for a loan. Many loan officers will offer pre-quals, in some cases just to get your business. But you have to be cautions that you do not interpret this as your approval. It is simply a loan officer’s educated guess.

Pre-Approval

A pre-approval is simply a full approval with conditions attached. This means that your file has been either submitted to an underwriter or run through an automated underwriting system. After doing this you would receive your “pre-approval” with a list of conditions that would need to be met in order to close the loan.

With a pre-approval, there is no more “educated guessing” involved. You now know that your loan has been approved and as long as you can satisfy the conditions listed, you will typically close the file. Just remember that you should ALWAYS request a pre-approval before committing to a loan officer or even a loan for that matter. Otherwise you may get started in the process only to find out that you do not qualify for financing.

Conclusion

So hopefully this simplifies the differences a little for you and now that you know what to look for, you will be more educated about the process. Each loan officer has different levels of experience to navigate through the mine fields of the financing process, so it’s critical to work with a loan officer that knows what they are doing. If you have any questions feel free to give me a call, I am more than happy to help.