The Difference Between Pre-Qualified and Rep-Approved

by Erin Fernschild 06/25/2019

If you’re a first-time homebuyer, odds are you’ve thrown the words “prequalified” and “preapproved” interchangeably. However, when it comes to home loans, there are some very important differences between the two.

For buyers hoping to purchase a home with a few missteps and misunderstandings as possible, it’s vital to understand the procedures involved in acquiring financing for a home.

Today, we’ll break down these two real estate jargon terms so that you can go into the mortgage approval process armed with the knowledge to help you succeed in securing a home loan.

Mortgage prequalification

Let’s start with the easy part--mortgage prequalification. Getting prequalified helps borrowers find out what kind and what size mortgage they can likely secure financing for. It also helps lenders establish a relationship with potential customers, which is why you will often see so many ads for mortgage prequalification around the web.

Prequalification is a relatively simple process. You’ll be asked to provide an overview of your finances, which your lender will plug into a formula and then report back to you whether or not you’re likely to get approved based on your current circumstances.

The lender will ask you for general information about your income, assets, debt, and credit. You won’t need to provide exact documents for these things at this phase in the process, since you have not yet technically applied for a mortgage.

Prequalification exists to give you a broad picture of what you can expect. You can use this information to plan for the future, or you can seek out other lenders for a second opinion. But, before you start shopping for homes, you’ll want to make sure you’re preapproved, not prequalified.

Mortgage preapproval

After you’ve prequalified, you can start thinking about preapproval. If you’re serious about buying a home in the near future, getting preapproved will simplify your buying process. It will also make sellers more likely to take you seriously, since you already have your financing partially secured.

Mortgage preapproval requires you to provide the lender with income documentation. They will also perform a credit inquiry to receive your FICO score.

Mortgage applications and credit scores

Before we talk about the rest of the preapproval process, we need to address one common issue that buyers face when applying for a mortgage. There are two types of credit inquiries that lenders can perform to view your credit history--hard inquiries and soft inquiries.

A soft inquiry won’t affect your credit score. But a hard inquiry can lower your score by a few points for a period of 1 to 2 months. So, when getting preapproved, you should expect your credit score to drop temporarily.

After preapproval

Once you’re preapproved for a mortgage, you can safely begin looking at homes. If you decide to make an offer on a home and your offer is accepted, your preapproval will make it easier to move forward in closing on the home.

Once the lender checks off on the house you’re making an offer on, they will send you a loan commitment letter, enabling you to move forward with closing on the home.

About the Author
Author

Erin Fernschild

I believe that when it comes to Real Estate sales and service, you can have it all and that is my professional goal. Erin Fernschild has lived in Stratford, CT since moving from New York City in 2005. First living in the direct waterfront community of Breakwater Key and then moving to Lordship in 2012. Her interests in Real Estate expanded while she was searching for a home that would meet her lifestyle and growing family needs. Commuting to Wall Street in NYC on the train gave her ample time to find the perfect location for all of her requirements, even though she was told by many “you can’t have it all”. Erin attended William Patterson University earning a Bachelor of Science degree in Business Administration and International Marketing. Throughout her career, she has worked for several Investment Banking Firms in NYC including First Boston, Bear Stearns, and Deutsche Bank. In 2016, Erin obtained her real estate license and joined RealtyQuest. Erin’s passion for service and understanding of what it takes to complete any transaction with the least amount of difficulties stems from her role at Deutsche Bank where she co-­founded its Relationship Management team which is accountable for the Bank’s overall commercial relationships. Erin worked face-to-face on a daily basis with large hedge funds, asset managers, and high net worth individuals, listening to their needs, communicating effectively and often acting as a mediator to resolve issues. Her friendly style, tenacity, and technological ability provide her clients with a competitive edge in challenging markets. She is a natural people person who will work tirelessly on her client’s behalf. She truly enjoys assisting others to Buy, Sell and Invest in Real Estate and understands the amount of time, dedication, and thoughtfulness that goes into finding the right property, at the right price, that meets all of her client’s needs.