Pre-Qualification Letter VS. Pre-Approval Letter
While these two terms are quite similar, a pre-qual is a ballpark estimate and a pre-approval is a conditional green light.
The pre-qualification letter is given after a conversation with a lender. You describe your current financial situation, what you earn and what you owe. They will run a soft pull on your credit. This should be a quick, painless process that is helpful in the early stages of the home search to determine a budget. However, in a competitive market, a pre-qualification letter will not be taken seriously by a seller.
A pre-approval letter is the “gold standard” for submitting offers. Here, you will need to submit tax returns, W-2s, bank statements, and pay stubs to the lender's underwriting team. With these documents in hand, the team can confirm exactly what you can afford. This will require a hard credit pull and these letters expire typically 60-90 days after receiving them due to the credit pull.
