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 for and can afford each month for the payment. Another reason, is you don't want to go looking at homes that are worth up to $500,000 just to find out once a lender runs the numbers that you can only afford up to $400,000. You may find a place and fall in love with it just to hear that you aren't approved for that amount. Trust me, that's a tough mind set to change.

Currently, we are in a housing market in Reno/Sparks where the inventory is low (if the list price is under $500,000) and the seller's have the advantage. As a buyer you obviously want to make your offer as competitive as possible. Some sellers wont consider an offer if it does not have a pre-approval letter with it. For the seller, accepting an offer without a pre-approval letter is more of a gamble because they do not know yet if it has been verified that a buyer can even really afford the price they are offering.

What's the takeaway here? If you are going to buy a home and need to finance it, get a pre-approval letter first. You will have the peace of mind knowing exactly what fits best for your budget and what you realistically can afford. If you don't have a lender yet, call your favorite Realtor and they can give you a few referrals.

For a more detailed explanation on pre-approval vs. pre-qualification check out this article:



Posted by Sarah Hughes on


Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.