A real estate professional based out of California, Eliseo Delgado Jr. has worked for years with The Mortgage Guys helping clients secure mortgages and find homes that fit their unique needs and preferences; Below, he helps readers understand the difference between pre-qualifications and pre-approvals and how they affect the home buying process
Eliseo Delgado Jr. receives rave reviews from his clients who have experienced his insightful real estate industry knowledge and his dedication to homebuyers first-hand. Many of his clients are unaware of the differences between pre-approvals and pre-qualifications, and he helps them understand how they differ and which they should aim to get.
“You’ll find some companies and agents use the terms pre-qualification and pre-approval interchangeably, but they mean very different things,” says Eliseo Delgado Jr. “Pre-approvals tend to hold a lot more weight with lenders and home sellers than pre-qualifications do, for starters.”
In order to get approved for a mortgage, Eliseo Delgado Jr. tells us, you have to first allow a lender to review your financial situation and determine that you’re eligible to make regular mortgage payments. During this time, the lender will also be able to determine how much money you can afford to borrow, how much the interest will be on a mortgage, and how low or high payments will be each month. This will ultimately allow you to narrow down your home search and find the right house that makes the most sense financially.
“Consider things from a seller’s perspective,” says Eliseo Delgado Jr. “They want to sell their home to someone who can afford the property and who will be able to make payments on time and make a smooth transition to the new owner. Without confirmation from a lender saying you can take on the house financially, it’s hard for the seller to take you seriously as a buyer. They’ll likely move on to someone else.”
When lenders talk about pre-qualifications, they typically mean that they’ve collected some basic financial information from a potential homebuyer and have estimated how much they can afford. However, this estimate is usually a ballpark figure and a rough estimate, to say the least. Sellers will want to see you working with a lender, and although lenders may hand out pre-qualification letters, they don’t have nearly as much value as a pre-approval letter.
Pre-approval, on the other hand, requires lenders to verify more solid information to verify your financial standing. They will likely look at W-2s, bank statements, and pay stubs. Through these, the lender can gain a more accurate picture of the types of loans you can get and how much you can afford overall.
“While they both can be useful when looking for a home, the pre-approval ultimately holds a lot more power and will be the one you want to get before speaking with sellers,” says Eliseo Delgado Jr.