Pre-Qualified vs. Pre-Approved
In today’s competitive real estate buying market, getting a Pre Approved Mortgage can be a multi-
faceted benefit to the prospective home buyer.
First we must examine the difference between being Pre Qualified and Pre Approved.
A Pre-qualification is an estimate of how large a mortgage a lender is willing to loan you. It is based
on income, assets, and debt information you provide the lender. Since the information is not verified,
the lender is not obligated to make this loan until your application is put through an actual approval
process. While this may be of some comfort to the buyer, it has little if any impact on Realtors and
A pre-approval is not a firm commitment from the lender but the lender will verify your credit history,
employment information, assets, and liabilities. Unlike a pre-qualification, you are actually pre-
approved for a certain loan amount; subject mostly to a satisfactory appraisal of the home you decide
to buy and a title search.
You should keep in mind that a pre-approval is usually not free. You may have to pay for a credit report
and any other fee the lender may charge. Additionally, a pre-approval expires after a certain amount of
time. Check with your lender to see how long the pre-approval is valid. If you decide you want the
benefits of a pre-approval, make sure you are really ready to buy a house. Otherwise, you will only be
throwing money away.
Benefits of a Pre-Approved Mortgage.
There are many benefits to arranging a pre-approved mortgage, here are a few:
Avoids Disappointment - Mortgage financing is verified for you BEFORE you start looking for a
home and you are sure of having the money you need to purchase the home you want. It is almost like
shopping with CASH.
Provides Peace of Mind - You know your mortgage financing has been approved and can
concentrate on finding the home of your dreams
Determines Price Range - You know what price the lender is willing to support. This can allow you to
focus on homes in the right price range. By doing this, you save your time and also wonít be guessing
on whether or not you can afford a certain home.
Facilitates a Speedy Final Approval- Usually within a week.
Costs Little- Since the major expenses are usually incurred AFTER the contract signing, the buyer
may have little up front costs.
Realtor Can be More Focused - Realtor knows the price range the lender will support and can focus
in on a particular price range. With a Pre Approved Mortgage, the Realtor also knows that the buyer
is serious and ready to buy.
Increases Bargaining Power - Sellers are more receptive to offers from pre-approved purchasers. If
a seller has two offers on his property of equal value, the buyer who has a mortgage commitment is
seen as stronger since the other buyer may not qualify at all or may take weeks to get a mortgage.
Additionally, sellers with time constraints may consider an offer with a Pre Approved Mortgage that is
a little less than one without because of the quick closing available.
Pre Approval is available from most lending institutions although some may be reluctant to do a
thorough job due to the time and cost involved. You may also be able to get pre approved for a number
of different programs which will give you the best rate and terms available to you.
∑ Be sure to work with legitimate lending institution. Avoid little known Mortgage Companies and
∑ Be sure all quotes and information you receive are in writing and have valid dates, amounts and
authorizations if necessary.
∑ Be sure to consider all options including type, term and interest rate. Adjustable mortgages may
be a good fit for you.
∑ Donít pay large upfront fees to your Mortgage Broker. Minor fees may be required to process
∑ Donít have your credit checked by several banks. This will lower your credit score. Obtain a copy
from one that can be used instead.
For more information on Pre Approved Mortgages and all you Mortgage needs, call Barry
Wellen of Wells Fargo at 516-224-8943 or 516-642-8264.