Or is it a pre-qualification letter you need? Here’s the difference

When you’re ready to get serious about buying a home, it’s best to have a pre-approval letter from a lender, so you can make an offer before someone else does.

Or is that a pre-qualification letter you’re supposed to get? Wait a minute, what’s the difference?

Both have their place in home buying, but only the pre-approval letter means a lender has committed to offering you a mortgage loan.

Here are the distinctions, according to the experts at Prosperity Home Mortgage, LLC (PHM), a Long & Foster company and one of the nation’s top mortgage lenders:

Lender pre-qualification: A mortgage consultant interviews the client about their income, debt and assets. It’s not a deep-dive into credit or earnings history. The loan professional looks at whether the client can qualify for a home loan and calculates an estimated maximum loan amount.

Lender preliminary approval: After getting pre-qualified, the prospective home buyer fills out an application for a mortgage. This is where all that documentation comes in, showing proof of income, assets and debts, tax records and a history of honoring credit obligations. If everything checks out, you get a letter saying you’re cleared to borrow up to a certain amount.

PHM helps buyers through this process in its Buyer Advantage program, where the pre-approval is submitted to the underwriter who generates a commitment letter for those who qualify. A Fastrack option can expedite the process for certain loan products.

“We offer both, because sometimes a Realtor or customer needs a quick pre-qualification letter, and then we follow up with the Buyer Advantage pre-approval after that,” said Ron Wivagg, PHM national sales support manager. “The commitment from a lender can strengthen the buyer’s bargaining position with sellers.”

If you’re thinking about starting the home buying process, enlist the expertise of a Long & Foster agent in your area, and try out PHM’s mortgage affordability calculator.