What is the difference between a mortgage pre-qualification and pre-approval?
These two terms seem interchangeable, but there are some big differences. A pre-qualification is used to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan. A pre-qualified buyer has answered some general financial questions to determine a loan amount he or she could be approved for. A pre-qualification helps the buyer find a home within their budget, but the buyer has not actually applied for a mortgage loan. A pre-approved buyer has made application for a mortgage loan prior to finding a property. A pre-approval involves more detailed analysis of the buyers credit history, income, employment, and assets. A pre-approval letter is issued once and underwriter or automated underwriting system has made a decision based on the details of the loan application. The pre-approval letter is a commitment in writing to fund the loan, pending certain contingencies are met (ex: appraisal requirements, pest inspections, clear title, and ve
