I'm Prequalified, Or Maybe I'm Preapproved, I Think... Does it Matter?

By
Real Estate Agent with NBI Realty LLC

Prequalified vs. Preapproved - What's the Difference, and Does it Make a Difference?

If you’re in the market to buy a home, whether you’re a prospective first time homebuyer, or a seasoned homeowner, you’ve probably heard the mantra – get prequalified! Or… was it preapproved?

Wait, what’s the difference?

One of the first series of words out of my real estate mentor’s mouth to me when I first started in the real estate biz was:

  • "Rule #1 in Real Estate – Make sure your buyer is preapproved!!!
  •  Rule #2 in Real Estate – Always Defer to Rule #1"

In hindsight, it makes perfectly good sense from all sides of the transaction. But for a highly motivated newbie agent like myself, had he not said those timely words, I would have found myself down a road of headaches and precious time wasted, of my clients’ and mine. How so you ask?

It’s extremely important that a buyer understands the difference between “Prequalified” and “Preapproved”. That difference can make or break a seller’s decision to accept your offer over another contender’s.

Prequalification
This essentially provides you and your lender an idea of your affordability – what, based on a quick snapshot issued in a relatively quick amount of time (sometimes you can determine your prequalification status through a lender’s website) of basic details about you (income, debts, etc).

Preapproval
This is a relatively lengthy and extensive process between you and your lender to determine the amount of funds you can actually qualify to borrow towards your future mortgage. The process involves information exchanges of income, credit checks, and a variety of other documentation, along with a loan application (based on the type of loan you choose, and lender requirements), where the lender assesses your income to debt ratio. With a preapproval, once an offer on a home is submitted and accepted, the lender awards the loan in the amount needed (based on specific terms determined between the borrower and lender). A little investment of time in the preapproval process can mean the difference between a ratified contract, or rushing back to the home-search drawing board.

As agents, we make this determination at the very beginning of client relationship. But every so often, clients may not understand the difference, or even realize whether they are or aren’t preapproved (or even prequalified). Buyers – it is very important to know your affordability, and if possible and appropriate, to get preapproved. You will save yourself time and heartache. A preapproval letter WITH your offer will set you apart from the rest. Real estate agents will attest to this, including yours truly, with my very first transaction – where my client had a preapproval letter in hand – this won her offer with the seller, despite being the last offer submitted among multiple offers on the home.

Remember, a preapproval will help your transaction go from this:

 

To this:

I hope you found this helpful! If you need assistance or have questions about the Northern Virginia/DC Metro area housing market, I’d love to help! Please feel free to contact me at the following:

Cristin Halla
NBI Realty LLC
571-244-6249
cristinhalla@gmail.com
facebook.com/cristinhallahomes
twitter.com/hallahomes

Locally-grown DC area native and licensed Realtor

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Debbie Reynolds 01/17/2013 06:33 AM
Topic:
Real Estate Best Practices
Tags:
preapproval
prequalified
real estate

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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Cristin, It is important to know the difference and preapproved is always the better option. Suggested.

Jan 14, 2013 06:55 AM #1
Rainmaker
215,393
Christine McDaniel
Coldwell Banker Residential Brokerage Porter Co. - Crown Point, IN
Broker Associate

Cristin - The serious buyers have no problem doing the extra it takes to get preapproved.  It is up to us to educate our buyers as to the difference.

Jan 14, 2013 08:52 AM #2
Rainer
16,967
Cristin Halla
NBI Realty LLC - Woodbridge, VA
VA/DC Metro Realtor

Debbie - definitely - going that extra mile early on will definitely pay off.

Christine - you're absolutely right - and that's the real value agents bring to the table.

Jan 15, 2013 10:05 AM #3
Rainmaker
773,561
Joanna Cohlan
Fresh Eyes For Your Home - Chappaqua, NY
Designing, Decorating & Staging Westchester Homes

Hi Cristin, just came over from Debbie's blog and yes, it is critical to be pre-approved and definitely makes a seller feel much more comfortable about the buyer.  Interesting blog and thank you for the clarification.

Jan 17, 2013 07:30 AM #4
Rainer
16,967
Cristin Halla
NBI Realty LLC - Woodbridge, VA
VA/DC Metro Realtor

Thank you Joanna! Absolutely agree - very critical to have at the onset of the buying process. And as others have said, critical on the agents part to continually educate our clients on the best approaches to any transaction

Jan 23, 2013 02:08 PM #5
Rainmaker
29,927
Ryan Bruzan
United Real Estate - La Grange, KY
REALTOR®, Home Improvements Professional

Oh yes! Another courageous newbie. I'm not alone! :) Great article. You definitely solidified my own understanding between prequalified and preapproved. Thanks for sharing!

Mar 24, 2013 10:20 AM #6
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Rainer
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Cristin Halla

VA/DC Metro Realtor
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