What’s the difference between a Pre-Qualification letter and a Pre-Approval letter?
There is a big difference between a pre-qualification letter and a pre-approval letter especially when you go to make an offer in a crazy market like the 2021 Denver metro real estate market.
Most of the country is experiencing way more buyers than we have properties.
What does that mean when the demand for housing is much greater than the supply?
Prices go up and sellers get very picky on which offer they’re going to accept.
If you are not working with a local lender, if you do not have a full pre-approval letter, your offer is not going to go to the top of the pile. It’s going to go down to the bottom of the pile. That is what we are told from every single listing agent across the market on a daily basis.
This is why is it so important to get from pre-qualification to pre-approval as fast as possible.
You want your offer to stand out and you want to be viewed as a serious buyer who is ready to pull the trigger and close on your home quickly.
When we take a pre-qualification application we take the information you’ve provided we pull credit and we pre-qualify you based on the information that you have given us verbally or written in an application.
When we want to pre-approve your loan we ask you to send in all of the documentation that support everything you’ve stated in your loan application.
What are these required documents for a loan application?
They could be:
- pay stubs
- tax returns if you’re self-employed or you have rental properties
- bank statements to show your assets for closing
- investment statements
We put a file together to document and support everything that you’ve stated in that loan application and then we can very confidently tell your agent how you tell the listing agent that we’ve seen everything and this file has been fully underwritten and it is ready to close, it’s just subject to a property title insurance and maybe re-verifying and updating a few things.
So that is the difference between a pre-qualification and a pre-approval. In this market it does not pay to try to go out there and make an offer with just a pre-qualification letter.
If you really want to put your best foot forward, get your documents into your lender, get that pre-approval letter, and get your file fully underwritten and be ready to close quickly!