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!
