Getting Pre-Approved vs Pre-Qualification
Article last updated July 2023
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 documents 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 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 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
About the Author
Montana Gabrielle Hooks is a SF Bay Area Realtor in the East Bay. Local entrepreneurship, playing bass guitar and singing live karaoke are a few of her favorite things. She serves on the Young Realtists Division, Oakland board is a member of the Associated Real Property Brokers. Follow her on Instagram or learn more about her on her website.
