What's the difference between getting pre-qualified and pre-approved?
When you submit an offer to buy a home, the listing agent (that's the real estate agent representing the sellers) will ask for a "lender letter" -- and what they mean is either a "pre-qualification letter" or a "pre-approval letter." Either one works for the sellers; they just want to know that you've spent some time talking to a mortgage company.
There's a huge difference between the two, and sometimes you can lose a property you want to buy by having the wrong one.
Getting pre-qualified is easy -- you can call a mortgage company and give some basic information to them, such as your monthly income and bills and rough estimates of your bank account balances, and they'll write a letter saying that you're pre-qualified to buy the home.
But they haven't pulled your credit, so they don't know what your scores are, and they're taking your word for everything. You could call me and say "Hi Jordan, I'm Donald Trump. I make $50 million a month and I have no personal debt," and I'd be able to dutifully write a letter for your purchase offer which says that you are pre-qualified to buy the place.
Getting pre-approved, on the other hand, takes a few more minutes but dramatically increases the confidence on all sides that you can in fact buy the home. To pre-approve you, I would indeed pull your credit report and ask you for a lot of information (where have you lived and worked for the past two years, what's your compensation structure, etc.) I'd upload all of your information to Fannie Mae's secure automated underwriting system, which would then not only give us an "approve-eligible" finding, but tell us exactly what paperwork they'll require for your loan file. For example, they might say that they only need to see bank account statements showing a certain amount of money (a recent one I did asked only to show $1500 in assets), or they might not require paycheck stubs or tax returns at all.
When I write a pre-approval letter for you, the listing agent knows that I've done a lot more homework on your loan -- I know a lot more about you and I know what it will take to get us all to the closing table. That's why, if they receive two offers at the same price, they might accept the offer with a pre-approval letter instead of the one with just a pre-qualification letter.
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Quick interest rates
| Program | Rate | APR |
| 30 year fixed | 6.375% | 6.623% |
| Jumbo fixed 30 | 8.500% | 8.652% |
| 5 year ARM | 5.750% | 6.159% |
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