A pre-qualification is normally issued by a loan
officer, who, after interviewing you, determines the dollar value of a loan
you can be approved for. However, loan officers do not make the final
approval, so a pre-qualification is not a commitment to lend. After the loan
officer determines that you pre-qualify, he/she then issues you a
pre-qualification letter. This pre-qualification letter is used when you are
making an offer on a property. The pre-qualification letter indicates to the
seller that you are qualified to purchase the house you are making an offer
on.
Pre-approval is a step above pre-qualification.
Pre-approval involves verifying your credit, down payment, employment history,
etc. Your loan application is submitted to an underwriter and a decision is
made regarding your loan application. If your loan is pre-approved, you are
then issued a pre-approval certificate. Getting your loan pre-approved allows
you to close very quickly when you do find a house. A pre-approval can help
you negotiate a better price with the seller, since being pre-approved is very
close to having cash in the bank to pay for the house!
