Welcome to Joe Knows Mortgages MINUTE, where we answer your mortgage questions.
On this week’s Joe Knows Mortgages MINUTE, we answer the question:
What is the difference between a pre-qualification and a pre-approval?
A pre-qualification is a discussion between a mortgage loan originator and a potential borrower regarding income, assets, and credit worthiness of the borrower. If someone is deemed “pre-qualified”, it means that it sounds like the borrower meets the guidelines based on that discussion. Just to be clear, these to do no have the highest probability for success.
On the other hand, at Morgan Financial (not necessarily everywhere) a pre-approval takes the pre-qualification a step further; all of the necessary documents are gathered from the borrowers, reviewed and approved by the underwriters, and any questions have been cleared up prior to being pre-approved. The likelihood of success is very high.
To tie it all together, the main difference between a pre-qualification and a pre-approval is a pre-qualification is a guess based on a conversation and a pre-approval (or what we at Morgan financial call an Express Pass) is substantiated by paperwork and reviewed by the decision maker.