Pre-Approval vs Pre-Qualification Letters

Hi, I’m Sophia Sanchez, Tampa Real Estate Broker with one of our preferred lenders, Rob DiGiore, from Guild Mortgage. Today we’ll talk briefly about the differences between pre-approval and pre-qualification letters. There is a difference, and we want to clarify some for you considering purchasing a home.

Typically, a pre-qualification is where we take some basic financial information from a client and often pull a credit report. Still, sometimes the income or assets is a self-reported number where nothing’s verified. We don’t ask for their bank statements or have them provide us with their pay stubs. There is a credit report sometimes, but it is primarily word-of-mouth. I don’t do pre-qualifications. I only issue pre-approval letters.

A pre-approval would be where we run a credit report and verify most of the income. We also run it through what’s called an automated underwriting engine. This is used for conventional loans and spits back to the originator an approval decision that the underwriter also uses.

However, lenders use the terms pre-qualification/ pre-approval interchangeably in our industry. They all have different processes for determining this. So you want to be careful and figure out or do some digging on how far that lender went with the client.

As an agent, if I’m the listing agent, I will call the lender to verify that that buyer has had their credit score reviewed, their financials reviewed, and all of that. Not just take it on the face value of the letterhead. Some of the more prominent companies that do a lot of online advertising have a fancy computer system that will pull a credit score, rely on self-reported information, and give the client a letter. So it’s effortless for a client to get that. However, I don’t believe an originator analyzed the debt-to-income ratio or the credit report.

My fear on the listing side is the sale and the financing going to what we call “blow up at the 11th hour”, and then it’s a big hot mess for everybody. We don’t want that to happen. I want everything to be super solid, and I expect the agent on the listing side to call and verify financials when offers are made.

As a lender, I love when a listing agent calls me because I know that my buyers have been through the process with me, have gotten the credit report, have turned in pay stubs, and have had their loan processed through automated underwriting, so I know it’s strong. I love it when listing agents call me, and that’s why we love referring you, Sophia.

Well, thank you. Hopefully, that cleared up some quality information for you. If you have any questions, drop us a message below, and we’ll reach out. Thanks so much.