Pre-Qualification vs. Pre-Approval

Many times when I talk to buyers, they are confused about the difference between a pre-qualification and a pre-approval. A pre-qualification is a general idea from a lender that you should be able to qualify for a loan.  A pre-approval means that you have applied for a loan and have been approved for that loan, subject to certain conditions (most typically appraisal, title commitment, and final underwiter approval).

In this market, it is very important to know what you’re doing when you walk into a home, because most foreclosure sales require a lender pre-approval (sometimes a pre-qualification will work) when submitting an offer. Talk to your lender or Realtor about this before you decide to make an offer.  A bank working with a foreclosure will often not accept an offer without some form of lender approval.

Also, be aware, sometimes a bank or lender with an asset (home or property for sale) may require a potential buyer to pre-qualify with that bank. This does not mean that you must use this bank!  That is actually illegal.  As a buyer you may use any bank that you wish, however this approval from the bank with the asset is to ensure that a buyer is capable of buying this home.