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Pre-qualified vs. pre-approved: Know before you buy
RE/MAX Genesis
Wednesday, November 28, 2007 • Posted November 27, 2007 10:00 PM

Most people know it’s important to have their proverbial financial house in order before taking steps to purchase a home. Besides paying off loans and holding off on large purchases, some people may also decide to get preliminary loan approvals before they start looking.

While that’s a great idea, consumers need to be aware of the differences between getting pre-qualified and getting pre-approved for a loan — because they are not the same.

Though either scenario puts the consumer in a stronger position as a buyer when shopping for a home, getting pre-approved carries much more weight in the eyes of a seller.

“Pre-qualified means that you may be eligible to borrow a certain amount,” said Gordon Robinson, a Realtor with The House Company in Galveston. “But pre-approved means your financial documentation has been checked out and the amount you can borrow has already been established by a lender.”

Getting pre-approved tells you how much money you can borrow from a particular lender, and makes the next step — applying for a loan — relatively fast and easy.

What does it mean to get pre-qualified?

When you get pre-qualified for a home loan, you include approximate income, current debts, and any meaningful details from your credit history. Then, a lender calculates how much money you will be eligible to borrow prior to application for a loan. All information submitted during pre-qualification is subject to verification at application. Because it’s information that hasn’t yet been verified, there’s still a question in the mind of the lender and the seller.

Also, the amount you might be eligible to borrow is often much higher than the amount you can actually borrow, so it’s wise to get pre-approved so you know exactly what you can afford.

“Don’t be misled into believing you can afford what you’re pre-qualified for,” advises Robinson. “It’s not always realistic. Stick to what you can afford.”

What does it mean to get pre-approved?

When you get pre-approved for a loan, you actually apply for the loan before you know which home you will purchase. After checking credit and verifying your income, the lender will commit, in writing, to funding your loan, pending a successful appraisal of the home and a few other conditions. There’s no commitment on your part to follow through with the loan, but it’s solid documentation that puts you well ahead of those who are only pre-qualified.

In fact, getting pre-approved can literally put you in the driver’s seat when it comes time to make an offer on the house you want. Being pre-approved shows the seller you’re a serious buyer who is ready and able to make a deal.

Get your finances in order before you buy

If you don’t know how much of your money you want to devote toward housing, it’s difficult to know what you can and can’t afford. If you haven’t done so already, just thinking about buying a home is a great excuse to get your finances in order.

First, check your credit history and report for any errors. It’s a good idea, even if you’re not quite ready to buy. If your credit report has mistakes or other blemishes, your credit rating will suffer. As a result, you could pay higher interest rates, or possibly not be able to secure financing.

Robinson recalls the case of one couple preparing to get married. The woman’s poor credit was affecting the whole financing process. While the situation worked itself out, those are issues to iron out before you get that far.

“Get any credit glitches cleared up well in advance,” he recommends. “Most lenders can help with minor problems such as slow pays or skipped payments. But in the end, the burden of proof is on you.”

Be smart, take steps to secure your finances, and get pre-approved. Soon you’ll be in the home you’ve always dreamed about — with the peace of mind you deserve.

For more information, visit For professional services, contact RE/MAX Genesis at 830-833-2000 or

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