(617) 620-5493

Preston Hall

Realtor /  Architect / Civil Engineer / MBA 

MA Licensed Real Estate Broker 9572517
Keller Williams Realty Boston Southwest 

Pre-Qualification vs. Pre-Approval

As a seller, you want to be sure the buyers who are making an offer on your home can complete the transaction. A Pre-Approval letter is the most powerful tool a buyer can use to prove their ability to purchase. A buyer with a Pre-Approval means less surprises or problems!
Anyone who wants to buy a home today should first review their financial situation with a lender. The understanding of how much can be borrowed reduces the possibility of problems later.  There is a big difference between a letter of pre-qualification and a letter or pre-approval, and it is important that you understand this difference before we receive an offer.

The Definition of a “Pre-Qualification”
When a lender grants a buyer a “Pre-Qualification”, it means the lender has reviewed the buyer’s finances and has done a basic calculation to determine how much that buyer may be able to borrow. While pre-qualification can reduce the processing time for home loans, it does not guarantee that a loan will be made by a lender.

The Definition of a “Pre-Approval”
When a lender grants a buyer a “Pre-Approval”, it means the lender has actually approved the loan with only 2 additional requirements. First, that the buyer chooses a home to purchase, and second, the home the buyer chooses appraises at or above the sales price. The “Pre-Approval” letter represents an actual commitment on the part of the lender. In order to secure such a letter it is necessary to complete a formal loan application and pay the associated fees. Credit, salary, and bank funds will be checked and if the loan is a good investment, the lender will issue a pre-approved letter that provides a commitment for a limited period of time, subject to a satisfactory property appraisal and title search.

Can you see how important it is for your real estate agent to be informed about such matters?  

When we receive a pre-approval letter it is critically important that it be vetted as much as possible.  Part of my process is to personally contact the mortgage professional and ask probing questions such as length of employment, credit scores, and assess how thoroughly the buyer’s financial profile has been examined.  We will then discuss these items to make sure that you have a high level of comfort with the Offer.