What’s the Difference Between a Pre-Qualification and Pre-Approval?

By Michael Durr

Mike Durr, a devoted family man, seasoned athlete, and passionate sports fan, brings over 30 years of real estate expertise to his role at KMG Lending, where his analytical approach and industry-leading closing times have helped his team close over $60 million in property sales.

Buying a home is exciting, but before you start touring houses and imagining your future, there’s one important step you can’t skip: understanding the difference between a pre-qualification and a pre-approval. If you’re not clear on this, you could be setting yourself up for trouble down the road. Here’s the difference between the two and why getting pre-approved is your ticket to success in a competitive market:

The trouble with pre-qualification. Pre-qualification might seem like an easy shortcut. After all, it’s quick and simple. But here’s the catch: it’s based on information you provide, without any verification. Your loan officer will ask about your income, assets, and credit, but there’s no real proof to back it up. This can leave you in a risky position. In a competitive market, you don’t want to risk your offer being ignored because your pre-qualification letter wasn’t solid enough.

Why is a pre-approval a safer bet? With a pre-approval, you provide all the necessary documents—pay stubs, W-2s, and bank statements. Then, the loan officer runs checks on your credit, assets, and identity. The big difference here is that everything gets verified and reviewed by an underwriter. This makes your pre-approval a lot more reliable and much stronger when you go to make an offer.

When should you get pre-approved? Timing is everything when you’re buying a home. I recommend getting pre-approved at least 60 days before you start looking seriously at homes. This gives you time to shop around without the pressure of rushing to get your documents together. Plus, it ensures your financial information is fresh and still valid. If you’re getting close to the 60-day mark and haven’t found the right home yet, you may need to update some of your documents—but that’s a small price to pay for staying pre-approved.

Why does a pre-approval letter matter in a competitive market? In a hot housing market, sellers are receiving multiple offers, which can happen within hours of listing a home. If your offer is accompanied by a pre-qualification letter, it might get pushed aside in favor of someone with a stronger pre-approval letter. Pre-approval gives you credibility and shows that you’re serious about buying and that you are capable of doing so.

What do you need for pre-approval? Getting pre-approved isn’t complicated, but it does require a few key documents:

• Your driver’s license for identity verification.
• Two months of bank statements.
• Your most recent pay stubs (30 days).
• W-2s from the last two years (or tax returns if you’ve had multiple employers).

Does pre-approval lock in your interest rate? Unfortunately, no. Pre-approval doesn’t lock in your interest rate. You can only lock in a rate once you have a signed contract on a house. But don’t worry, a pre-approval will put you in the best possible position to move quickly when the right home comes along.

Getting pre-approved is a crucial step in the home-buying process, and it could be the difference between landing your dream home and missing out. If you need help or have questions about pre-approval, you can call or text me today at 281-348-9899 or email me at mike@mortgageguys.pro. I can help you get pre-approved quickly, so you can start your home search with confidence.