Pre-Qualification vs. Pre-Approval: Which Wins the Best Homes?
At the end of 2024, Gig Harbor recorded the fewest new construction homes on the market in over ten years. Competition is tight, and having every edge as a buyer is imperative. One of the best ways to achieve this is to obtain a mortgage pre-approval, which allows you to demonstrate both your intent and capability to buy. However, why is this so important, and what benefits does it offer you?
Below, we discuss how a seller-ready pre-approval letter can significantly expedite the process of purchasing your dream home, enabling you to make a firm offer and gain the seller’s attention.
Why Pre-Approval Beats Pre-Qualification in Gig Harbor
According to the National Association of Realtors, homes are selling across the country in an average of less than a month. One of the key factors encouraging this trend is the recommendation that buyers see a pre-approval for their mortgage.
However, many people think that pre-approval is the same as prequalification. This is not the case.
While a pre-qualification informs someone of the potential for a loan, a pre-approval confirms that the buyer is highly likely to receive the mortgage.
As such, having such a confirmation reduces the risk to the seller at the time the buyer makes an offer. If they have information from a mortgage broker stating clearly that the buyer is already approved for a loan, it means that they are much less likely not change their mind after saying they want to buy, only to return in disappointment.
In situations where multiple offers exist, sellers tend to prefer pre-approvals because they often shorten the time to close, thereby reducing the likelihood of a financial issue.
How Sellers Decide Between Pre-Qualification vs. Pre-Approval
When comparing the difference between pre-qualified and pre-approved mortgages, a seller will likely examine the language in both. If they find clear signals of approval in a letter, this can often be a guarantee of sale, and sellers may even call the loan offer to confirm. As such, if you are seeking pre-approval, be sure to provide your contact information for the best chance of receiving a confirmation.
Meanwhile, asking for an expiry date and information on how long a mortgage rate will remain constant can reassure a seller that you are serious, as well as that your pre-approval is up to date.
If you are unsure about what else they can offer, speak with local lenders to explore additional options. They can inform you of additional information related to specific mortgages, as well as elements you may not be aware of, such as whether they will or won’t lend due to flood zones, insurance terms, or specific HOA requirements.
Determining the Strength of a Pre-Approval Letter
When a seller reviews a letter, they will be looking for elements that indicate they do not need to worry about potential future denials. As conventional home-purchase applications had almost a 9.5% denial rate in 2023, according to the Consumer Finance Protection Bureau, you likely don’t want to join that statistic and find yourself in an embarrassing situation where you have to inform a seller that you need to pull out.
When you ask for such a letter, try to confirm the following in a pre-approval:
Check it’s not a pre-qualification letter
Reviewed paid stubs and bank statements
Property type confirmation
Letter customized to the specific listing
Maximum four-week-old letter
Your lender’s direct phone and email for verification
These elements can provide you with the best assurance that your letter is legitimate and up-to-date regarding the specifics of the building you intend to buy.
How to Get Pre-Approved Faster
One of the first steps to a faster pre-approval process is to start with a soft credit check. You can do this yourself, using the resulting information to save you time and money in seeking approval later on. You can also use it to plan your expected budget based on the recommendations from the credit check.
When applying for a loan, ensure that you upload all your documents securely in one package. These will likely be what the lender bases its decisions on, so ensure they are accurate the first time. If they might not be, keep your phone ready and on you, so that we can respond to any requests as soon as they come in.
Common Roadblocks to Watch For
The National Association of Realtors has recently shared data indicating that 13% of real estate sales contracts experienced delayed negotiations and settlements in the three months preceding the sale. These could have been for dozens of reasons, including the sudden transmission of unclear information to the mortgage broker, or delays in inspections that resulted in late pre-approvals.
These could all put your purchase at risk. Therefore, ensure that if you change an employee or the payment structure, you should notify your mortgage provider at your earliest convenience.. Failure to do so could result in sudden, last-minute changes that significantly impact your buying power.
Move Fast With a Pre-Approval and Win Big in Gig Harbor
When comparing pre-qualification vs. pre-approval, expect an in-depth discussion. Go in with a pre-approved mortgage to have the peace of mind you deserve when buying a home. Make sure to keep the letter, however, and update it should you undergo a significant life change.
When you think everything is in place, contact Schulte & Co. We can connect you with trusted local lenders and give you a glance at what closing alongside a team you can trust truly looks like. So, book a consultation with us, and benefit from what we offer you as realtors in the future.
