Is there a difference between Pre Qualification vs Pre Approval when it comes to getting a mortgage? Yes there is a difference. First lets talk about what each of them is about and then talk about the difference.
What is a Pre Qualification? A pre qualification is essentially a quick and fast way to tell you how much of a mortgage you may be able to finally qualify for. This can be done over the phone without sending the lender, bank or mortgage broker any documents to support or verify your income. With a pre-qualification, the lender can give you an idea of how much you can afford when it comes to a mortgage loan. You will be asked for your income, current debts, (such as car loan, credit cards, student loans, etc.) and how much of a down payment you will be bringing in.
What is a Pre Approval? A pre approval is when a lender actually makes a commitment to lend you money to buy a home. With a pre approval, the bank or lender will request documentation and financial records from you. You will go through a preliminary approval process and will actually result in a more definite amount you can afford. This shows the seller of the property you are looking to purchase that you are very serious about buying because you have made some commitments.
Now lets talk about the difference. The big difference here is with a pre-qualification, no one can really tell exactly or with certainty how much of a home you can afford and if you are even serious, but with a pre-approval, both you, the seller, your real estate agent and the loan officer know exactly how much home you can afford. A seller is likely to accept your offer to purchase their home or real property and you come from a position, strong enough to negotiate because you are more likely to purchase the seller’s home than another person with just a pre-qualification or nothing.