These terms are often used interchangeably when talking about a person's eligibility for obtaining a home loan. They are very different and carry different weight when you are writing an offer on a home. Here's why:
A pre-qualification ("pre-qual" is how you will commonly hear it) letter is simply based on the buyer verbally telling the lender their income and assets. A pre-approval letter is when the buyer/borrower's documentation is received and reviewed to verify the data. At an office meeting I heard a great explanation of a pre-qualification letter; "it's not worth the paper it's printed on."
As a buyer, this is important to know because a pre-approval letter will give you a more accurate picture of what you can actually afford to buy a house…
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