Benefits of Getting Pre-Approved for a Mortgage Loan Before Home Shopping

The home buyer benefits from getting pre-approved for a mortgage loan before beginning to shop for a home. A pre-approval will give the buyer more negotiating power with a potential seller than a pre-qualification from the lender.

Getting Pre-Approved

The mortgage lender will determine if the buyer is qualified for a loan and, if so, will give the borrower a maximum eligible amount. This in-depth process of applying for a loan will include submitting a range of documents from tax returns and bank statements, to credit and employment history and divorce decrees. When the borrower is pre-approved, he will know how much the lender is willing to loan him. Although this is not a guarantee until he goes through final approval after making an offer on the house, it tells him how much he can afford. Showing the seller a pre-approved letter also gives the buyer a hands-down advantage in negotiating with the seller over someone who is estimating his "borrowing" profile.


Pre-approval should not be confused with pre-qualifying for a loan. The buyer is not submitting a mortgage application. But, the pre-qualification process does give him or her an idea of whether s/he is likely to qualify for the loan s/he wants, although the actual approval is not granted until all the paperwork is in, the facts stated when pre-qualifying check out, and nothing inconsistent is uncovered. This is an informal process which can be done fairly quickly either by telephone or e-mail.