I keep hearing "pre-qualified" and "pre-approved" used like they mean the same thing. What's actually different about them, and which one do I need before I start making offers?

Short answer: pre-qualification is a quick estimate based on what you tell your loan originator; pre-approval means a lender has actually verified your income, assets, and credit, and it carries far more weight with sellers.

• Pre-qualification usually takes a few minutes. You share your income, debts, and an estimate of your credit over the phone or online, and your loan originator gives you a rough price range. No documents change hands yet.
• Pre-approval starts the same conversation, then goes further. The lender pulls your credit report, collects pay stubs, W-2s or 1099s, and bank statements, and runs your file through underwriting. What comes out the other side is a pre-approval letter stating a specific loan amount you qualify for.
• For a VA loan specifically, pre-approval also depends on your Certificate of Eligibility (COE). A lender needs that document on file, or at least confirmation you can get one, before issuing a real pre-approval letter.
• Sellers and listing agents in a competitive market often treat the two very differently. A pre-qualification letter can get you in the door for a showing. Many agents won't present an offer to a seller without a pre-approval letter attached.
• Neither one guarantees final approval. Once you're under contract, the lender still orders a VA appraisal, confirms the property meets VA minimum property requirements, and finishes underwriting on the actual home you're buying, not just your finances in the abstract.
• A pre-approval letter doesn't last forever. Income, debts, and credit can all shift, so if your house search runs long, expect your lender to ask for updated pay stubs or bank statements to refresh it.

Gene can take you through full pre-approval early in your search, so the offer you write carries weight instead of restarting the finance conversation with every house you look at.

Gene Richter, MLO, NMLS #2806488 | PBT Bancorp, NMLS #257781. General information, not a commitment to lend. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs.