Pre qualification letter and a Pre approval letter - the difference
In the time during and post pandemic, many home sellers are requiring a pre approval letter - even to see a home. So what's the difference? It is critical in any market to get pre approved, and to start the process at least 90 days out from looking at homes. Home sellers know it is very easy to get a pre qualification, and to be taken seriously (especially when they want to limit the number of people in their home) many are requiring that level of certification to even view a home.
Paying by CASH? Proof of Funds letter steps in place of the pre approval - your CPA or bank can provide this valuable instrument to win you that home!
Regardless of pandemics, some sellers are immune compromised, or simply only want serious people making an appointment to see their home. It may be a pain for most of us to dig out all those docs - however, if you are serious about winning that great deal, you'll need to do it anyway. Get it out of the way now and enjoy your search after passing that first hurdle. A great lender can also usually help you increase your credit score by a few (or a lot) of points, that may improve your score by the time you actually get your loan.
A Prequalification letter provides an estimate of what a buyer can borrow.
Lenders take a buyer's word for their estimate of earnings and debt, often online or over the phone.
Does not always require a credit check.
A Preapproval states what a buyer can actually borrow. it states a specific loan amount, and it is provided after a number of documents that a bank or loan provider requests.
Lenders ask for proof on various things they need from a buyer
Requires a credit check - what is referred to as a 'soft pull'
A preapproval is like your 'certificate' that you are serious about looking at homes and ready to purchase if you fall in love with the next one you see. It also allows you to compete in home price ranges or markets that are competitive.
Please send your pre approval to your Allstar Agent ahead of time - it's the first domino! Need help? Ask us about our preferred lenders.