Many times I work with buyers who ask me this question:
“What is the difference between getting pre-approved and pre-qualified?”
Did you know that in parts of California right now, there are often multiple offers to buy a house if it is priced right? This means that it is more important than ever to know the difference between getting pre-approved and pre-qualified.
If you are in an area where multiple offers on a house are common, there is one thing in particular that you can do to help your chances of the seller accepting your offer above all the other offers.
Remember — sometimes the “seller” is really “the bank” because it is a bank owned property and this “tip” is one thing that people who work at banks in the REO division actually understand and look for:
Get Pre-Approved and not just Pre-Qualified.
Get Pre-Approved, Not Pre-Qualified
Getting pre-qualified is easy. Usually, it involves having a brief conversation with a loan officer and based on the information that you give him, he can then tell you if you are pre-approved or not.
The problem with this is that it is “garbage in, garbage out” – so if you don’t know exactly how much you make or you don’t list out all of your assets – your “pre-approval” might not be worth the paper it is written on.
So if you called me, told me that you had perfect credit, made a million dollars a month in W2 income and wanted to finance a $200k house — I would say that you are pre-approved based on what you told me.
But if you came to the office, provided paystubs and tax returns documenting your pay history and I pulled your credit and verified everything – then you can actually become pre-approved.
Pre-qualified = the lender takes your word for it.
Pre-approved = you have proven it to the lender.
Of course, becoming pre-approved takes a little bit more work on your part, but when you are just one of 5 offers to a seller? Getting pre-approved can make all the difference. There is usually no fee for getting pre-approved and it is a fairly simple process and well worth your time.
Unless of course you don’t mind submitting multiple offers on multiple houses and just hope that one of them sticks.
