Pre-Approval vs. Pre-Qualification

There’s a difference.

My team focuses on getting buyers “pre-approved,” but you may also hear about getting “pre-qualified.” Some people seem to use these terms interchangeably, but there is a difference in the meaning. Pre-approval is the stronger indication of loan approval and gives the buyer peace of mind that the loan will be closed.

With pre-qualification, the borrower submits information, and the lender runs a credit check. The pre-qualification is usually automated and relies on information supplied by the borrower, without verification.

For pre-approval consideration, the borrower submits documents, such as paycheck stubs, tax returns, information on assets, source of down payment, and our underwriter validates the information submitted. Credit is also pulled in this case. Many times, the underwriting process uncovers issues that require addition documentation or factors that will limit approval. We call our pre-approval process “Element Express,” and it gives borrowers a very high level of confidence that the loan will be approved at the final stage and won’t be an obstacle to closing on the home purchase. We issue a pre-approval letter that buyers can show to their real estate agents as well as to submit with an offer.