Pre-qualified vs. Pre-approved Mortgage Loans - As a potential buyer of a new home, most real estate professionals will require a new buyer be pre-qualified or pre-approved for mortgage financing before showing available properties.

Home buyers who have been pre-approved are looked upon favorably. With everything else being equal among multiple offers, sellers most likely choose to accept the offer accompanied by a pre-approval. Home buyers who have been pre-approved are almost guaranteed financing. One of the sellers' worst nightmares is to go into contract only to find out two months later that their buyers cannot secure financing, thereby disrupting their own housing/relocating planning.

Getting your prequalification letter prior to contacting a realtor to see property will let that realtor know that your are a serious prospect and are reasonably able to finance the properties you are shown. Realtors will give qualified prospects the most personal attention.

To be pre-qualified means that a mortgage broker has reviewed your preliminary documentation and has assessed that you can afford to purchase a house worth "XXX”. The pre-qualification is not a loan approval, but merely an assessment of what you are qualified to buy with your income and credit characteristics. A pre-approval is more detailed in the fact that an actual lender has looked at all your documentation and has made a preliminary approval based on certain criteria.

Pre Approval Letter - The Pre Approval Letter is a document from a lender guaranteeing that a potential buyer can afford to purchase a home up to a stated amount.

To get a Pre-Approval Letter, simply orally giving your financial information to the mortgage broker is not enough. Supporting documents such as paystubs, W2's, tax returns, and bank statements are required. After a lender examines these financial documents, a Pre Approval letter is issued. A Pre-approval is almost a loan approval, without the information pertaining to the subject property.

This is different from a pre qualification letter where the Mortgage broker merely states their opinion based on what the borrower has told them. A pre Approval letter is a lot more solid commitment than a pre qualification letter.

It's a great idea to have one of these prepared prior to making an offer on a house. It will strengthen your offer and will show that you are committed to purchasing a home.

In many markets, a real estate agent or seller will not go so far as to show a house without a pre-approval letter in hand, so it is always advisable to have one prepared as soon as you plan on seeing homes in fast moving areas. This may also help you plan for what sorts of homes you may be able to afford and estimate how much money you will have to put down.

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