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Friday, May 18, 2007

Pre-Approved or Pre-Qualified?

Don't Confuse "Pre-Approved" and "Pre-Qualified" with a Loan Commitment:

These are debatable terms in real estate because not all lenders apply the same definition to each term. I have learned that one leading real estate dictionary contains neither expression because their definitions are uncertain.

According to one school of thought, when you are "pre-qualified," the lender is making an educated guess about how much you can borrow based on information you've provided. When you are "pre-approved," the lender has verified everything you have told him or her and is offering to lend you up to a given amount at current interest rates -- under certain conditions.

Whether pre-qualified or pre-approved, final clearance and a check at closing -- a loan commitment -- are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check, and other verifications. When meeting with lenders, always ask how they define each term and what additional steps will be required to obtain a loan.

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