While the terms “pre-approval letter” and “pre-qualification letter” sound similar, they are different in what they provide to you as a borrower.
A pre-qualification letter, the more basic of the two, is something you get from a lender after they verbally collect information from you (for example, relating to income or assets) but before they have documentation from you to support what you have told them. Before issuing a pre-qualification letter, though, they will likely run your credit report to see if, from that perspective, you are able to qualify to purchase a home.
At this point, the lender will give you a letter saying that, pending further verification, you will qualify for a certain payment amount. However, if information they later find tells them something else, then you may either qualify for a lower payment or potentially no amount at all.
Getting a pre-approval letter is a much more involved process where you show items such as pay stubs, tax returns and bank statements, to name a few. This is the letter you want to be showing a real estate agent when you go home shopping, and many will ask for one before they spend time with you.
If you are thinking about purchasing a home and want to get pre-qualified before you start any type of search, call or email me. I’ll help prepare you to be able to put your best foot forward when you go out to find the home of your dreams.