05 Oct Pre-Qualification V. Pre-Approval. One Is Much Better Than The Other

Hoping to buy a home? Awesome, it’s a great idea.

Buying a home always starts at the lender—you need to be sure they’ll give you some money.

The first time you call or visit your lender, they will either pre-qualify or pre-approve you, and they aren’t the same thing. One’s like a breezy chat with your favourite aunt, while the other feels more like a job interview with a side of paperwork-induced migraines. Let’s break it down, shall we?

Pre-Qualification: Think of it as the friendly neighbour who pops over for a chat on a sunny Sunday afternoon. Your lender asks you a few questions, does some quick math, est voilà, they throw out an estimate of what you can borrow. Mortgage brokers love this one because it’s a hook to get you in—a five-minute icebreaker, and who doesn’t have five minutes? They’ll save the tough questions for later; they don’t want you walking across the street on them for now.

Pre-Approval: Now, this is where things get real. Like “meet the parents” real. The lender rolls up their sleeves, pulls your credit score, and scrutinizes the darkened corners of your finances. They’ll ask you to produce more documents than you knew you had. Not exactly a picnic, but it’s a necessary step before you can officially call yourself a homeowner.

Here’s the deal:

• A pre-qualification is informal. With merely a pre-qualification, you’re still watching from the sidelines. You can’t shop for a home. 

• A pre-approval is formal. With a pre-approval in place, you’re in the game. You can shop for that dream home and even make an offer.

Good Advice: Ask your lender to provide a letter of pre-approval. They might not like it because it’s a pain but do it anyway. Take the wheel and drive. I’ve seen sales fall through on financing because the buyers couldn’t get a loan. They thought their lender had pre-approved them correctly but hadn’t. How’d you like to drive past your dream home and see another dude mowing the lawn because your mortgage broker fumbled the ball. Brutal.

CB