Many homebuyers are under the assumption that pre-approval and pre-qualification letters are the same, but they’re not! Lenders provide a pre-approval letter by analyzing income and asset documentation, debt-to-income ratios, and taking into account credit scores; giving a more accurate picture of how much house a homebuyer can afford. Pre-qualification does not include any credit analysis, leaving both realtor and client less confident about their true buying power.

Why Get Pre-Approved?

• A pre-approval letter is more reliable and in-depth than a pre-qualification letter
• Homebuyers know how much money they can qualify to borrow, streamlining the house search
• Financially qualified buyers have more leverage to negotiate with a seller
• Pre-approval letters signal to real estate agents that a buyer is serious about purchasing a home

The importance of pre-approval letters is highlighted by instances of bidding wars or competition due to low inventory of homes. While this may seem extreme, homebuyers with pre-approval letters are taken more seriously in a sea of multiple offers.

As buying becomes more affordable than renting, more potential homebuyers will be out in full force; creating fierce competition for the same listings. A pre-approval letter will not only strengthen an offer; it helps clients understand their buying potential and helps the real estate agent define the field of eligible properties that they can afford.

It’s important to begin the search for a new home with a pre-approval letter in hand. Contact us today to get started! We have a great list of local lenders ready to work hard for you.

Already pre-approved? Check out some Do’s & Don’ts to protect your pre-approval!