You will hear a lot of terms thrown around during the buying process, two very important ones are prequalification and pre-approval. Many buyers assume the two are the same, but they are very different.

Prequalification is the amount of money a loan officer expects you to qualify for based on limited information provided by you on your application.

A pre-approval is supplied by the person making the decision regarding your financing (the underwriter) and takes a much closer look at your financial situation and history.

Underwritten appraisal

Having an underwritten appraisal means you will know the amount of money you will be able to finance before ever making an offer. You will have the decision from the person who has the final say in your loan approval, preventing any surprises from popping up down the road.

Market competition

In today’s seller’s market, buyers need to take advantage of everything available to make sure an offer is accepted. Sellers will often have many competing offers, but when a seller knows a buyer is preapproved as opposed to prequalified, they can move forward with a peace of mind knowing the loan is not going to fall-out at the last minute. This can make the difference when competing with other offers that are only supported by a prequalification letter as opposed to an underwritten preapproval.

Smooth closing

No one wants to pay extra days of interests as a result of a deal not closing on time. Nothing is more frustrating than finding out that there are lingering conditions needed on the loan creating a sense of urgency late in the process to satisfy the necessary requirements. These conditions could by scrounging up additional pay-stubs, rushing to track down historical information, etc. When pre-approved, everything is taken care of in the beginning and there are no last-minute surprises.