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Preapproval vs. Prequal
 BUYER'S TIP:
Find a lender who will be willing to supply you with more than one preapproval letter so that you can customize your preapproval to your offer price. A lender who tips off the home seller to your "top dollar" based on the total amount you can afford to borrow, if you need to, isn't doing you any favors!
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Pre-qualification is based on a simple calculating process performed by a lender or real estate agent to provide an affordability guideline for buyers. Since there is no verification, the lender is not bound to make a loan.
 Pre-approval, on the other hand, is based on independent verification of the information. The lender has fully documented the buyers' ability to borrow, checked the credit rating and set a maximum based on income, credit and down payment. Serious home buyers take the effort to get pre-approved because it gives them an edge over other unqualified buyers competing for homes in a seller's market. The knowledge of what they can afford also keeps them from looking at homes that are out of reach. The lender will provide a letter of commitment based on the verified information from your mortgage application. The letter of commitment helps home buyers meet a common contingency in the offer to purchase and provides peace of mind to nervous home sellers about the financial ability of the buyers. |
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