What is the difference between pre-qualification and pre-approval?
Pre-qualification is a lender's opinion of your ability to purchase a home and is based on your verbal statement of income, employment history and available down payment.
Pre-approval is a lender's underwriting decision that you are conditionally qualified and is subject to the lender's review of your completed application, credit check, appraisal and home inspection.
When it comes to writing an offer for a home, a pre-approval letter contains stronger language to the seller and the listing agent than a pre-qualification. You, the buyer, have the increased negotiating leverage of cash buyer status because the mortgage is already in place. A pre-approval can often be a determining factor in winning the contract in a competitive bid situation.