In today’s low inventory market, it is common to have multiple offers on a property. One aspect that can set the offer apart is a pre-approval letter. I sometimes hear the words pre-qualification and pre-approval used interchangeably, but they have different meanings. Today, I will define both.
Pre-qualification can be issued after the lender has spoken to the client to understand their financial picture and run their credit report. The credit reportallows the lender to see some of the financial history. This is why a strong credit score is important.
Pre-approval is when the lender has verified several pieces of information provided by the borrower. Here is a list of documents a client needs based on loan type. Pre-approval also matters because you can catch a lot of issues if the lender receives the documents up front.
In today’s market, a pre-approval letter can win you a deal AND ensure a smooth closing because the lender has already verified much of your information.
Photo courtesy of woodleywonderworks (Flickr)