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Getting Pre-Approved vs Pre-Qualification

Pre-qualified? Pre-approved? Let's look at the differences.

Pre-approval: the first step

The first step in the Bay Area home buying process is to connect with a lender of your choice and submit an application to receive a Pre-Approval Letter. This is an important first step because the outcome of the pre-approval process will determine the price range you should stay within during your home search.  


As part of this pre-approval process, the lender will ask you to provide pertinent financial documents to support your application, including verification of employment and W2s. A credit report will also be requested. 

Additionally, in the San Francisco Bay Area's competitive Real Estate market, most sellers will require you to submit a Pre-Approval Letter as a necessary component of your offer package.

What's the difference between pre-qualified and pre-approved?

The main difference between a pre-qualification letter and a pre-approval letter is the strength both of these document carry in the home-buying process. 

It is more difficult to obtain a pre-approval letter than it is to obtain a pre-qualification letter. To receive a pre-approval letter, a buyer will have had to form a relationship with a lender, submit financial documents and consent to a credit check. In comparison, to obtain a pre-qualification letter, a buyer generally does not need to submit financial documents, nor consent to a credit check.

Because of the ease of obtaining a pre-qualification letter, they do not hold much weight in the eyes of potential sellers and seller's agents. On the other hand, having a pre-approval letter signals to sellers, sellers' agents and buyers' agents that you are a serious buyer.


In the Bay Area's hot housing market, sellers generally require buyers that wish to make an offer on a home to include their pre-approval letter in their offer package, along with proof of funds

Understand a fully-underwritten loan

One common misconception about pre-approval letters is that they act as concrete evidence that your loan will get funded by your lender. In reality, it is more accurate to think of pre-approval letters as an offer by a lender to fund your loan.


Getting your loan fully-underwritten means that you have submitted a few more pieces of supporting financial documentation after obtaining your pre-approval letter, and your lender has looked very closely at your financial landscape to more surely guarantee the funding of your loan.


Some lenders will wait to initiate this step until after you place a winning offer on a home. Other lenders require underwriting to be completed as part of your initial pre-approval process.


While getting your loan fully-underwritten does require a few extra steps on your part, it's always a good idea to complete this step before you begin submitting offers. With a fully underwritten loan, buyers can submit stronger offers with more confidence that their loan will be funded by the lender. 

Information provided courtesy of Gabrielle Hooks, DRE 02138118

Learn more about the home-buying process




Agent on duty


Gabrielle Hooks

Realtor, EXP Realty, DRE #02138118

Area of Speciality: 

East Bay, Tri City Area, South Bay

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(510) 350 - 3025

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Gabrielle is online now and ready to chat.


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