Being Pre Qualified vs. Pre Approved and Knowing the difference.
If you have ever purchased real estate, chances are you’re familiar with the phrases “pre-qualified” and “pre-approved”. While some people use them interchangeably, there is actually a huge difference between the two. Applying for a commercial mortgage can be slow and require much documentation. Fully understanding the process can help make or break a commercial real estate deal.
To better understand the difference between the two, take a look at the descriptions below:
This is generally the first step in applying for a mortgage and will give you a good idea of how much you should be able to qualify for. In order for a lending institution to pre-qualify, an applicant typically will need to provide documentation such as: credit score, income, recurring debt, bank account balance, cost of subject property and possibly more. Because of the option to self-report, getting a pre-qualification letter is often an easy, but conditional first step towards obtaining financing.
Think of a pre-approval letter as a more definitive word from the lender that they will offer you financing. Pre-approval generally requires the lender to actually run your credit check, obtain pay stubs and bank statements from you and possibly ask for documentation, such as rent rolls, for the subject property.
As you can see, Being Pre Qualified vs. Pre Approved and Knowing the difference can help you avoid having your deal fall apart at the last-minute due to an inability to obtain financing. In addition, sellers are generally more willing to negotiate with buyers who have been pre-approved. So while it may be a more intensive process, it’s worth the time and effort to go that extra step if you are serious about closing quickly on an important deal. Being pre-approved means shortening the timeline for the loan process and demonstrates that you are a qualified buyer.
Being Pre-Qualified vs. Pre-Approved and Knowing the difference is important tool to have when considering purchasing any type of real estate. For your commercial real estate needs, contact one of our experienced brokers today.