86% of sellers prefer homebuyers with pre-approval. At the same time, the majority of homebuyers get pre-qualified first.
On average, a home buyer views 9 houses in their home shopping. It generally takes 8 weeks to search and get the house. However, both options can help you get a good deal.
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Pre-qualification or Pre-approval Mortgage 🤔
- Mortgage pre-approval is an official document from the lender to the homebuyer. It provides the estimated amount a homebuyer can afford to buy a house.
- Pre-qualification is more like a ballpark number from a lender. It gives homebuyers an idea of what range they should go for.
- While some homebuyers opt for both options, most of the sellers prefer buyers with pre-approval.
Pre-approval vs. Pre-qualification: What Do Home Sellers Prefer?
A pre-approval letter is a more authorized and official document from the lender. Whereas pre-qualification gives you a rough estimate of how much you can afford.
Mortgage pre-approval is the first choice for home sellers. However, pre-qualification can help you get a rough estimate of the mortgage. 86% of the sellers prefer buyers with pre-approval.
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What Is Pre-approval?
A mortgage pre-approval is an evaluation that a lender does to determine the borrower’s credit limit. The lender conducts a thorough credit check before they provide a loan amount.
It is important when buying a house, as it may help you seem like a serious buyer. Around 47% of homebuyers don’t get pre approval. You may have to make multiple applications to get qualified for it.
>>What’s My Home Worth? Get the home value estimate of the future property and determine how much loan you are eligible for.
Documents Needed
In case, you qualify for a certain type of loan, you have to submit documents according to the specified conditions.
Here are all the standard documents you will need for mortgage pre-approval:
- Social security card
- Bank statements
- Credit report
- Pay stubs
- Personal Id
- Tax documents
- Investment account statements
- Monthly debts list
Pre-approval Letter
The pre-approval letter is an official letter from the lender. The letter specifies all the details of the borrower and the maximum amount of loan they can get.
The pre-approval states that the borrower can be eligible for the loan if their financial condition remains the same. It also includes certain terms and conditions a borrower has to follow to get the loan.
What Is Pre-qualification?
A pre-qualification is an estimate of the loan amount a borrower can receive from the lender. The homebuyers can get the pre-qualification letter without any verification and credit checks.
Most buyers opt for this process to get a rough figure for their home purchase. The pre-qualification doesn’t guarantee you a firm number. Henceforth, most sellers prefer pre-approval over pre-qualification.
Documents Needed
Here are the documents you need to get mortgage pre-qualification:
- Personal Id
- Credit history
- Pay stubs (if required)
- Bank statements
- Other standard documents (if required)
Difference Between Pre-approval and Pre-qualification
Pre-approval and pre-qualification are used interchangeably but differ from each other in various ways.
Pre-approval is an indirect commitment from the lender to provide a loan based on the borrower’s financial condition.
On the other hand, pre-qualification is a rough estimate of the amount a borrower can get. There is no assurance or guarantee, and there are no credit checks or reviews of finances. Most of the buyers get pre-qualification to get a rough idea of the loan amount they can get.
| Pre-approval | Pre-qualification |
| A proper credit check is needed to get pre-approval. | The self-reporting method is acceptable in pre-qualification. |
| It provides a firm figure a borrower can get. | In pre qualification, the estimate is not firm. It is based on the homebuyer’s estimates without verification. |
| Pre-approval builds trust among buyers and real estate agents. | Real estate agents and home sellers don’t entertain homebuyers with pre qualification. |
| All standard documents are required for verification. | A few documents are required. |
Which One Should You Choose?
Pre-approval is the ideal option if you are serious about home buying. Many buyers get rejected for pre-approval. But there are fair chances of you getting pre-approval, as 53% of buyers get pre-approved by lenders.
Whereas with pre-qualification, you can get a rough figure and easily filter your desired houses. Many homebuyers opt for both to increase their chances of buying their dream house.
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Frequently Asked Questions
How long does a pre-approval for a mortgage last?
Generally, the pre-approval for a mortgage lasts for 60 to 90 days. The lender provides a specific period for the mortgage.
How accurate is a pre-qualification letter?
Pre-qualification is not as accurate as a pre-approval letter. Most of the time, the mortgage is denied on the pre-qualification letter because of a lack of verification.
Does pre-qualification require a hard pull?
The pre-qualification doesn’t require any credit checks or bank statement verification. Therefore, it undergoes a “soft” pull process to complete the application.
Related: prequalification vs preapproval,mortgage prequalification vs preapproval
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