Pre-Qualification vs. Pre-Approval

In recent pre-COVID times, a simple pre-qualification letter was enough to start your home search with and was the only letter most lenders would issue until you were under contract, but in today’s competitive, multiple-offer market (driven by lack of inventory), you had better be armed with a pre-APPROVAL from your lender of choice. What’s the difference?

The most boiled-down explanation of the different between a pre-qualification and a pre-approval is that the first is based on what the buyer told us about themselves, and the later means the lender has validated and verified what you told us, but of course there’s a little more to it than that.

The above table outlines the differences in a clear visual. Most items are self-explanatory, but you may not be familiar with the “automated underwriting system”. Both Fannie Mae and Freddie Mac require an “approve/accept” result from their computer-generated underwriting system. This is the final step in a pre-qualification process and is required before a file hits the underwriter’s desk. This system improves processing times by catching any obvious red flags on a loan application, but a more in-depth human review is required before an approval can be issued.

The bottom line is this: A pre-approval tells the seller and the seller’s agent that you have been reviewed and given the stamp of approval by the lender’s underwriting department. YOU are approved, and all that remains is to approve the property. In this competitive housing market, this assures the seller that you are a serious buyer who is prepared for a smooth and expedient transaction!

Here at The TLC Group at Canopy Mortgage, the Mortgage Dogs can often process a pre-qualification in a couple of hours, and a pre-approval in around 24 hours. You’ll need to be prepared to provide some basic documentation to back up your identity, income, and assets, but we make it a point to only ask for what we need based on your specific scenario and hold your hand through the entire process to keep it as simple and low-stress as possible. Credit reports are good for up to four months, so if you’re planning to start home shopping, don’t delay! Schedule a discovery call with me today and let’s get you ready to make a strong offer on the next home of your dreams.



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Tammy Metzger

Residential Mortgage Loan Originator. Dog Mom. Knowledge Seeker. Voracious Reader. Solo. Outdoors enthusiast. Genre Film Lover.

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