There is a difference between the terms Pre-Approval and Pre-Qualify when you are shopping for a Home or Mortgage.
Pre-Approval – uses basic information as well as electronic credit reporting to determine whether a lender will loan you money. If you are pre-approved for a mortgage, the lender has given you a commitment to support your new purchase. It is a firm decision on a home loan and makes you a “cash buyer” in the seller’s eyes. This gives you increased bargaining power.
Pre-Qualification – it is not a mortgage approval but simply an estimate of what you can afford to borrow. When ou pre-qualify for a mortgage, the lender also collects basic information regarding your income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount. The lender has not yet committed to supporting your financial needs and, therefore, you have not received an actual guarantee of funds. It is not an assurance of mortgage approval.
People who are pre-approved for a mortgage are more attractive candidates to the seller and have a better chance of getting the property when they make an offer. Most sellers will not even consider a contract from a buyer that does not include a pre-qualication letter with the offer.