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Prequalification vs Pre-Approval

Happy Thursday – I hope you are doing well. For this week’s video I want to discuss the difference between prequalification vs pre-approval and when to use each. Please see below and watch my video for more details and as always, let me know what else we can do to help.

Prequalification – A prequalification is when a lender does a soft credit check to make sure you qualify and help you figure out your budget. This should ideally be done before you talk to a real estate agent and always before you look at homes. Since it is a soft credit pull, there is no negative impact on your score. NOTE: You should never try to make an offer with a prequalification letter. Due to low inventory, it is a very competitive market, and your offer will not have a chance of winning if you do not have a full pre-approval letter.

Pre-Approval – A pre-approval is when a lender does a hard credit pull and reviews all your documents with underwriting. This should be completed before you start looking at homes. This timing is very important for a few reasons.

Frist, this is the letter the seller will require when you submit your offer. I cannot tell you how many times I have seen a client fall in love with a home before completing this process and then by the time they are pre-approved, they have already missed out on the home. Also, once you are pre-approved, you can do a faster closing with shorter contingencies if needed to win your offer.

Second, this is where you finalize your budget. I can typically qualify most buyers for larger homes than they should buy based on their personal budget. When buying a home, you really need to ask yourself this question. What is the most money you want to bring to closing and the highest payment you can afford based on your budget? Once you know this, we can help to determine what price point home you should look at with your realtor. This is very important for 2 reasons.

  • First, you don’t want to fall in love with a home that is outside of your set budget and put yourself into a position where you justify buying something you cannot afford. You never want to be house poor.

  • Second, since we are in a competitive market this allows us to know how high we can bid on a home if we are in a bidding war. It takes the emotion out of this process. We know we can bid up to your max budget amount and if we don’t win, we can move on to another home.

Stewart Sadler

Managing Partner

Cornerstone Mortgage Group


Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938

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