A pre-qualification is normally issued by a loan officer,
who, after interviewing you, determines the dollar value of a
loan you can be approved for. However, loan officers do not make
the final approval, so a pre-qualification is not a commitment
to lend. After the loan officer determines that you pre-qualify,
he/she then issues you a pre-qualification letter. This
pre-qualification letter is used when you are making an offer on
a property. The pre-qualification letter indicates to the seller
that you are qualified to purchase the house you are making an
offer on.
Pre-approval is a step above pre-qualification. Pre-approval
involves verifying your credit, down payment, employment
history, etc. Your loan application is submitted to an
underwriter and a decision is made regarding your loan
application. If your loan is pre-approved, you are then issued a
pre-approval certificate. Getting your loan pre-approved allows
you to close very quickly when you do find a house. A
pre-approval can help you negotiate a better price with the
seller, since being pre-approved is very close to having cash in
the bank to pay for the house!
