Marva Morris: Hi! This is Marva Morris, your New Jersey realtor and thank you for joining me. Today I have Matt Fischman with me who is a mortgage loan officer. Matt, you want to introduce yourself?
Matthew Fischman: Hey everybody! My name is Matt Fischman and I am a mortgage loan officer with Barrett Financial Group. I have a 16 years of experience and today we’re going to talk about the differences between a mortgage pre-qualification and a mortgage pre-approval.
Marva Morris: Excellent! So Matt and I are doing a whole series on things that you need to do; little small tidbits in order to prepare to buy a home. So we want you to look out for our next video, but today we’re talking about pre-qualification vs. pre-approval. So Matt, we all hear this. We hear: Do you have your pre-qual / pre-qualification or do you have a pre-approval? And as consumers, a lot of us lay people, they don’t know what the difference is. So tell us the difference between a pre-qualification vs. a pre-approval.
Matthew Fischman: Great question Marva! A lot of times those terms will just kind of thrown around interchangeably and not everyone knows that they are, in fact, two different distinct things.\
In a nutshell, a pre-qualification is a more kind of a basic look at somebody’s financial picture. It basically just says that the mortgage company asks you some questions, may or may not have checked your credit, and kind of their best guess, based on the limited information they have, is that you can afford up to a certain price.
A pre-approval takes that many steps further. It goes in a lot more depth. So a pre-approval – that involves pulling a credit report and doing a formal review of it. It involves supplying documentation – things such as pay stub, bank statements and W-2s. So all of your finances, your income and your assets are verified and confirmed with documentation. So at the end of the day, a pre-approval is a lot stronger and preferred to a pre-qualification.
Ultimately when you make an offer on a home you’re going to have a letter that’s going to say that you’re either pre-qualified or pre-approved. That letter gets provided to the seller when you make an offer. So when a seller sees your offer, if they see that you’re only pre-qualified, they may have some reservations because they don’t know if the mortgage company really was able to do their due diligence and make sure you’re going to be able to ultimately get fully approved for the mortgage. Whereas if you have the pre-approval that makes your offer a lot stronger and paints it in a better light because then the seller knows that everything was documented and everything was formally reviewed. So those are kind of the the main differences.
Marva Morris: Excellent! So I’m going to tell you what I heard as a layperson and the realtor. If you have a pre-qualification that’s great. But remember, that’s just you going in on the computer saying I think I make this amount a month. But the pre-approval, actually, vets that. By using your paycheck stubs, they tell you exactly what you’re making and exactly what you can afford.
Now as a realtor who has sold many homes with my sellers, when I am looking at the differences, we’re looking at that because we’re saying the pre-approval means you’ve done everything that you need to do. All you need to do now is to find a house and go through the rest of the process. So just remember, pre-approvals are better than pre-qualifications and you want to get that pre-approval. That way you also don’t get any surprises at the end. Right, Matt?
Matthew Fischman: Absolutely! No one likes surprises in the 11th hour so getting that pre-approval; that’s going to avoid that. Great point Marva!
Marva Morris: Sure don’t. Well look out for our next tip tidbits and we look forward to seeing you soon. This is Marva Morris, your New Jersey Realtor. Have an awesome day!
Matthew Fischman: Bye.