By daniel.estrada@nafinc.com
February 24, 2015
Pre-approved vs. Pre-qualified 
It seems like too many homebuyers are finding out the hard way the difference between, pre-approved and pre-qualified for their new home. There isn’t anything worse for a first time buyer or any buyer in fact to hear the words you “didn’t qualify” after the long 3-6 months of house searching and letting all your family and friends know you have bought a home. I, unfortunately, have had many emotional conversations with folks after their lender notified them (in most cases with an email) your loan was not approved. And after discussing their processes with their lender, it always turns out that the initial mistake has been at the initial stages of the process. I had previously written about “applying for a home loan takes more than just an application” and many are starting to realize that. Let me share with you the difference between these 2 misunderstood processes:
Pre-Qualified
Getting pre-qualified is the initial step in the mortgage process and it’s always the first step. You supply the loan officer or lender an application by phone or website and they process it and collect your credit report. Your report will then disclose all your debts and credit history. After the loan officer evaluates the information given, and the credit report, they can now give you an idea of the mortgage amount for which you have pre-qualified. Some lenders do not have to pull your credit to get pre-qualified, which I cannot believe. This initial process is just the basis to get started and to understand the plans, needs and goals of the buyer. At this point the lender starts advising the buyer of the loan program they would qualify and/or any recommendation of any loan program available.
As you can see this is a very quick procedure and based only on the information gathered and provided to the loan officer. This pre-qualification amount is just an idea of what your loan officer can expect to be approved. For this reason alone, getting Pre-Qualified is not enough and does not carry the same amount of weight from buyers who have been Pre-Approved and have been thoroughly investigated.
Pre-Approved
Being pre-approved is the next step and it will take more work and involvement between the homebuyer and loan officer. After your application has been processed you will probably receive an automated email with a list of all the documentation needed for the next step. Your lender will then review and perform an extensive process to make sure all of your financial background and past credit history clears any guideline waiting periods like bankruptcy, short sales or foreclosures. At this time the loan officer should be getting back to you with questions or additional needed items based off his extensive review. From this point, your loan officer should provide you a specific amount you’ve been approved for. You will then be provided a Good Faith Estimate or some type of worksheet that would give you full details of closing costs, payment and funds needed for down payment.
As you can see there is an enormous difference between these two processes. Be warned, that pre-approved and pre-qualified are not the same thing and this could cause you to lose your dream and most of all it could take you through a big emotional roller coaster.
If you would like to talk more about getting pre-approved please feel free to contact us directly at 661-472-6088. We’re here to help!