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Mortgage Pre-Qualification vs. Pre-Approval: What’s the Difference?

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When buying a home, cash is king, but most folks don’t have hundreds of thousands of dollars lying in the bank. Of course, that’s why obtaining a mortgage is such a crucial part of the process. And securing mortgage pre-qualification and pre-approval are important steps, assuring lenders that you’ll be able to afford payments.
However, pre-qualification and pre-approval are vastly different. How different? Some mortgage professionals believe one is virtually useless.

“I tell most people they can take that pre-qualification letter and throw it in the trash,” says Patty Arvielo, a mortgage banker and president and founder of New American Funding, in Tustin, CA. “It doesn’t mean much.”

We asked our experts to weigh in to help clarify the distinction.

What is mortgage pre-qualification?

Pre-qualification means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount.

But here’s the rub: Most often, the pre-qualification letter is an approximation—not a promise—based solely on the information you give the lender and its evaluation of your financial prospects.

“The analysis is based on the information that you have provided,” says David Reiss, a professor at the Brooklyn Law School and a real estate law expert. “It may not take into account your current credit report, and it does not look past the statements you have made about your income, assets, and liabilities.”

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Testimonial

Local knowledge: ★★★★★ Process expertise: ★★★★★ Responsiveness: ★★★★★ Negotiation skills: ★★★★★ Julie and Sarah were right there with us helping with their expertise in so many ways. I am an absentee owner. They were there to help choose plants for landscaping. For instance, Following up on the bad plants put in by the paid Landscaper. Buying additional plants when

★★★★★/5 Stars.

user03970 Sold a Single Family home in 2014 for approximately $750K in Walteria, Torrance, CA.

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The Lockwood Team has represented buyers and sellers on over 175 properties in Walteria and Victoria Knolls alone. The Lockwood Team are proud Sponsors of the Annual National Night Out Walteria Block Party, which promotes the neighborhood watch and sense of community. It is the biggest block party in Torrance. Each transaction supports the Children’s Miracle Network and children in our South Torrance Schools.

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