Understanding the difference between these two items is key to strengthen your bargaining power. Make sure you are pre-approved by a lender upfront.

Pre-Approval consists of the following:

  • Typically, it is based on verification of your income, credit and assets (in some cases, verification may not even be necessary)
  • Usually is offered by any credible lender at no cost prior to actually finding your home
  • Establishes credibility for real estate agents and their sellers that you are a serious – and approved – buyer for their desired loan amount
  • A title review, sufficient appraisal must be in place, along with no change in financial condition, for final approval

Pre-Qualification typically consists of the following:

  • Offered by most credible lenders
  • Usually based on summary information provided by you on your income and assets
  • Substantiated by a sufficient review of property, financial documents and the corresponding requirements necessary for final approval
  • Establishes a “ballpark” estimate of your buying power

Basically, having a Pre-Approval in place is more powerful and the position you want to establish over a Pre-Qualification. This becomes especially true in a multiple offer situation. It can be the difference in locking up the property and missing out on it.