Pre-Qualified or Pre-Approved?

Buyers are constantly asking us at HomeInfoSearch.com the question, “When I call for mortgage financing should I get pre-qualified or pre-approved?”  There are important distinctions associated with these two processes.

• A pre-qualification is a quick 15-20 minute phone call about income, debt and down payment to find out how much you can afford.  The financial institution, however, does not investigate employment or credit history for a pre-qualification.  Many institutions will provide a pre-qualification letter but, without background checks, this letter carries neither very little weight on its own nor very little weight with a potential seller.

• A pre-approval is quite different.  Besides a phone conversation about income, debt and down payment, it also includes an examination of bank statements, tax statements, employment history and credit reports.  Simply put, if you’re serious about buying a home, GET PRE-APPROVED!  A pre-approval is such a strong indication of your ability to purchase, Eastern Bank calls it a "Pre-Commitment"!  From their perspective, being pre-approved means that Eastern Bank is ready and willing to provide financing and will do so as soon as the customer finds a home to buy!

It's easy to see why a pre-approval is such a powerful, persuasive document to submit right alongside your "Offer To Purchase"!