Pre Qualified vs. Pre Approved, and the One Step Beyond That Most Buyers Don’t Know About

I hear pre qualified and pre approved used like they mean the same thing all the time. They don’t. And there is actually another level beyond a typical pre approval that most buyers don’t even know to ask about.

The names vary depending on the lender. You might hear it called an underwritten pre approval, a TBD approval, credit approval, or something similar. What matters isn’t really what they call it. What matters is how far the lender has actually gone in reviewing your finances.

And in a competitive offer situation, that can make a real difference.

Pre qualification is the starting point.

A pre qualification is generally based on information you give a lender about your income, debts, assets, and finances. Depending on the lender, there may be limited documentation reviewed at this point.

It’s a perfectly reasonable place to start. It gives you an idea of what you may be able to afford and whether you’re in the right range before you get too far into the process.

But it’s still the beginning.

Pre approval goes further.

With a pre approval, the lender generally pulls your credit and reviews documentation to verify your income, assets, debts, and overall financial picture.

That gives the lender a much better idea of whether you actually qualify for the loan you’re planning to use.

But here is something buyers don’t always realize.

Not every pre approval means an underwriter has actually reviewed your file.

Different lenders have different processes, so two buyers can both have something called a pre approval and still be at very different points in the mortgage process.

Then there is the more thorough level.

This is the one I wish more buyers knew about.

Some lenders will take your file and send it through underwriting before you even have a property under agreement.

Your income, credit, employment, assets, debts, and other financial documentation are reviewed by an underwriter ahead of time. Assuming everything checks out, you have gotten through a significant part of the approval process before you ever make an offer.

It’s much closer to a full loan approval, although it is not final approval.

The lender still has to approve things connected to the actual property you buy. That can include the appraisal, title, insurance, condo documents when applicable, and any other conditions the lender requires.

But a big part of the question about you as the borrower has already been addressed.

That can matter.

Here’s what a seller’s agent is actually looking at.

When I’m on the listing side and an offer comes in, I’m not just looking at the number on the page. I’m looking at the entire offer and trying to understand how likely it is that this transaction gets all the way to closing.

Financing is part of that.

A pre qualification leaves more unanswered questions.

A pre approval tells us the lender has gone further and verified more of the buyer’s financial information.

And if the buyer has already gone through underwriting, that tells us something else. The lender has already taken a much deeper look at the borrower before the offer was ever written.

That doesn’t automatically make one offer better than another. Price, contingencies, timing, deposits, closing date, and what matters most to the seller all come into play.

But when two offers are otherwise very similar, less uncertainty around financing can absolutely matter.

This is where buyers get confused.

The terminology is honestly part of the problem.

One lender may call something a pre approval that another lender calls an underwritten pre approval. Another may have their own name for it entirely.

So instead of asking your lender, “Am I pre approved?” I would ask a more specific question:

Has an underwriter actually reviewed and approved my financial file?

That answer tells you a lot more.

If the answer is no, ask whether that is something they can do before you find a property.

When should you do this?

If you’re just starting to look and trying to understand your price range, you don’t necessarily need to jump through every hoop immediately.

But once you are seriously looking at homes and getting ready to write offers, I want you to know exactly where you stand.

And if you are going into a situation where there may be multiple offers, I would absolutely have the conversation with your lender about whether they can take your file through underwriting ahead of time.

There is nothing worse than finding the house you really want and then trying to strengthen your financing at the last minute because offers are due that night.

Do the work before you need it.

Pre qualification helps you understand where you might stand. Pre approval gives you much more certainty. And getting your file through underwriting ahead of time can put you even further along in the process.

The important thing is not what the letter is called.

It’s knowing what has actually been done behind it.

If you’re getting ready to start looking and you’re not sure what kind of approval you have, call me. I’m always happy to talk it through and help you figure out what questions to ask your lender before you’re standing in a house you love with an offer deadline a few hours away.

617 970 5144

Warmly,

Jenna Levin