What's the Difference?

Not all prospects are qualified buyers. Simply put, some are more capable of buying your home than others. But how do you know the difference when a prospective buyer comes calling? Most serious buyers enter the house hunting process with a mortgage pre-qualification or a pre-approval. Each indicates a different level of buying power.

1. Pre-Qualified – This means a REALTOR®, lending agent, financial advisor or the buyer has done a general review of the finances without an in-depth examination of credit. A simple analysis of debt to income indicates how much money the buyer has to spend on a mortgage payment after all other monthly expenses are met. However, someone who is pre-qualified does not have a promise for funds from a bank or lender.

2. Pre-Approval – This indicates a more rigorous financial review. The bank or lender will carefully examine credit, income and debt. The buyer will need to provide documentation for each, making the pre-approval more telling than the pre-qualification. The lender will recommend different loan programs, tell the applicant what dollar amount they would be eligible for, and at what terms and rates it would be given. A pre-approval letter outlines all this information. If a buyer is serious about purchasing your home, this letter tells you they have the potential backing to make the purchase happen.