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Pre-Qualified
vs Pre-Approved
What does this mean and will I need to do either?
Pre-qualification or pre-approval is the seller’s assurances that the buyer
has the capacity to execute any contract they enter and will more than likely
complete the transaction. It also allows your real estate agent to know that you
are a qualified buyer, and what price homes to be searching out for you. In this
market sellers require Pre-approved or at least Pre-qualified offers, before
they will even consider them.
PRE-QUALIFIED basically means you have been asked by a lender, a series
of questions concerning your employment history, income and debt status and
other financial considerations, like savings accounts, etc. Based on the answers
to these questions the lender will compute your debt to income rations and
determine what price loan you will be able to qualify for.
PRE-APPROVED means you have done the above plus you have paid for a
credit report, and submitted pay stubs, W2’s and bank statements to your
lender, to have your credit, income, and employment verified. Getting
pre-approved can be done relatively quickly, ranging in time from a few hours to
a day or two, depending on circumstances. Your lender will then issue a letter
or certificate to me, your agent. I in turn present the letter to the agent of
the seller at the time the offer is made. What this tells the seller is that you
are not a financial risk to buy this house. What this means to you is that it
puts you in a better or stronger negotiating position.
Always opt for Pre-approval. You will be required to do this within a specific
number of days after your offer is accepted. Therefore, it is in your best
interest to do it before you make an offer, putting you in a stronger position
of acceptance or negotiating.
It is important for you to know and understand that most sellers consider
Pre-qualification of no real value and will only accept Pre-approved offers.
Double offers or multiple offers are not as uncommon in real estate transactions
as you might expect. Sometimes sellers have more than one offer to consider at
the same time. Price is not always the deciding factor. If you offer as an
example, $2000 less than another party and you are approved and they are not,
the seller could easily decide to go with you, the sure thing, as opposed to the
other offer that is just a probable or maybe. Or another example might be; two
offers are made at one time and the price offered is the same, but you are
pre-approved and the other buyers are just pre-qualified. Your offer would
probably be accepted over the other buyers.
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(509)
981-1001