Pre-Qualification vs. Pre-Approval: Which is better?

When you are in the market to purchase a home, you want to be in the strongest negotiating position possible. Although price is a very important negotiating factor, it is also important that you are able to prove to a seller that you are a strong buyer candidate.

A strong buyer is one who is pre-approved. Note the difference between pre-approval and pre-qualification:

A buyer becomes pre-qualified by spending a few minutes, either by phone or in person, answering a few questions from a lender. Based on the answers you provide, the lender is able to pronounce you as pre-qualified and can issue you a certificate that you can show to a seller. In recent times, these certificates have become worthless to sellers, the reason being that none of the information is verified. It is only after pre-approval that a seller is able to vest their confidence in you, the qualified buyer.

Once you are pre-approved, you hold more bargaining power. The process can take anywhere from a few days to a few weeks, depending on your situation. Pre-approval is the ultimate weapon, and all buyers should take the time to acquire it.