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Pre-Approval Letter vs Pre-qualification Letter - What's the Difference

Friday, September 23, 2016   /   by Jason Huerkamp

Pre-Approval Letter vs Pre-qualification Letter - What's the Difference

Pre-Qualified vs Pre-Approved

When considering buying a home, a real estate agent will often insist that you get a confirmation letter from a lender that you can afford and qualify to purchase a home and that your mortgage has a good chance of being approved. What does the real estate agent really and why is that?
  • Its important for the homeowner first, to know that the finances are taken care of and that you are qualified to buy their home
  • The agent is
    • sure that you are serious about buying 
    •  comfortable that you are looking at homes in the right price bracket
  • Your offer will be taken seriously if your finances are in order and your mortgage is pre-approved


It is important when you are considering purchasing a home that you find out how much home your finances will allow you to buy. This is just the first of many steps in the process of getting a home loan. You would call a lender or to go online and complete an initial assessment, taking into account your income, your debts, assets and liabilities and then see how much home you can afford to purchase and what your debt to income ration is. This is a vital piece of information and can even prompt you to pay off some of your debt so that you can qualify for a higher mortgage with a better interest rate.

This is not a formal application but definitely one that can give you an idea about your buying power and in what price point to target your home search. With this piece of information, you can begin driving through neighborhoods and educating yourself on the size of home, the amenities, the types of areas that you are able to purchase in. That is all part of the learning process and before you know it, you will have a good idea of where you want to live and what your potential home consists of.


The pre-approval process is more in depth than the pre-qualification. The pre-approval means the prospective buyer has been to see a lender, provided proof of income and expenditure and has a credit report run and once all the issues, if any, have been expunged, the buyer would be given a confirmation letter saying he/she has been pre-approved and meets the requirements to buy a home and get a mortgage. That would give the real estate agent confidence to represent you when buying your home and of course will allow the seller of the property to have more confidence that your offer is serious and you can potentially close on the deal.

What Can Go Wrong?

Of course the final approval of a mortgage only comes to the fore once an offer has been accepted and the formal application is in. The lender will protect their potential investment first.

They consider
  • the appraisal and what other homes in the area have sold for
  • Is there investment sound and what are the chances of them getting their money back if you should default on the loan
  • what does the home inspection look like
The Lender will also want to be sure that you have not damaged your credit score in the interim time from pre-approval to approval, so if you have applied for a pre-approval, do not do anything to change your status quo, it could mean disqualifying your mortgage pre-approval and losing the home you want. Often we see potential buyers go and buy furniture etc for their new home not realizing that their credit score can change and could possibly jeopardize the home loan application before the fact.

Choosing a Lender

When choosing a lender ask for referrals. Ask your realtor for a list of lenders they have worked with. The chances are that those closest to you and the transaction will have the answers. Don't forget this is the biggest investment you will ever make and at the end of the day you want someone with experience who is not there as your friend but as a financial advisor - they need to know what they are doing and what the best offer is and what the various options are to suit you.

Choosing Your Home Team

The Huerkamp Team are your real estate specialists in the Twin Cities and surrounding communities of Minnesota. We are ranked in the top 1% of agents nationwide! The Team is dedicated and experienced in the Twin Cities real estate market and we look forward to being your real estate agent for life! You will have a great experience buying or selling real estate.  We have many raving fans and the experience to deal with your real estate transaction. 
Huerkamp Home Group
Jason Huerkamp
14300 Nicollet Court # 208
Burnsville, MN 55306

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