Mortgage Pre-Approval or Pre-Qualification? What do Realtors and Sellers Want?


Jul 31, 2018 Homebuyer blog


So you’re ready to start looking for a new home! You’re loosely familiar with the steps you should take. You’re going to need financing to purchase a home, so you should get Pre-Approved before you look. Or, wait…maybe you should get Pre-Qualified before you look? It’s definitely one of them, but which one?


Pre-Approval and Pre-Qualification are both options that your Loan Officer can offer before you begin your search. But which makes more sense? Which will help you out more?


The most crucial difference between the two options is the amount of paperwork you’ll be required to provide. Pre-Qualification doesn’t require much documentation, whereas Pre-Approval does. Here’s a short list of items that you’ll need to provide when applying for Pre-Approval: proof of employment (names, addresses, phone numbers), proof of income (pay stubs), tax documents (W-2s, tax returns), and more.


Pre-Qualification doesn’t require any of that. You speak with your Loan Officer and give them honest answers. Sounds a lot easier than the Pre-Approval process, so why wouldn’t you stick with Pre-Qualification?


The short answer is because a Pre-Approval is underwritten by your lender, while a Pre-Qualification is not. That’s why they need all your documents for the former. This allows them to create a more accurate projection for what you qualify for.


That said, a Pre-Qualification can still give you a fairly accurate estimate for what you can borrow. But there’s one bigger reason why to play it safe and get a Pre-Approval letter.


Realtors don’t take Pre-Qualification as seriously as Pre-Approval.


Like chess…it’s a black-or-white thing. And there’s a good strategy to follow.


In a competitive housing market like this one, many Realtors will not accept clients who have not been Pre-Approved. They know the work that goes into a Pre-Approval, and they know buyers who have it are the safest bets. There is simply too much up in the air with a Pre-Qualification.


The Realtors working for the seller are even more likely to require a Pre-Approval. It’s a seller’s market, and a Pre-Approval helps the closing process move more efficiently. They don’t want to waste time waiting for the paperwork to come through, even if another bidder is slightly higher.


Alright, so it seems like a Pre-Approval is the way to go when you’re ready to buy. But what if you’re on the fence? Maybe you’re not sure…you just want to get a feel for how much might qualify for. Is Pre-Qualification a better option because it doesn’t require all the paperwork?


Not necessarily. Although Pre-Qualification doesn’t need all the paperwork, it does require a credit check—just like a Pre-Approval does. Both will have an impact on your credit score, so you might as well go for the more valuable option. If you’re not convinced you’re ready to buy, you may be better off planning a budget at home.


At the end of the day, Pre-Approval is the best bet for new homebuyers. It doesn’t require any commitment to the broker who provides it, and it shows Realtors and sellers that you’re a serious contender.

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