A pre-qualification is normally issued by a loan officer, who, after interviewing you, determines the dollar value of a loan you may be approved for. However, loan officers do not make the final approval, so a pre-qualification is not a commitment to lend. After the loan officer determines that you pre-qualify, he/she then issues you a pre-qualification letter. This pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you have the credit-worthiness qualified to purchase the house on which you are making an offer.

Pre-approval is a step above pre-qualification. Pre-approval involves the verification of the information on your loan application, such as credit history, income, employment history, etc. by an underwriter. The underwriter then makes the decision to pre-approve your loan and issues a pre-approval certificate. Getting your loan pre-approved typically allows you to close very quickly when you do find a house. A pre-approval can also help you negotiate a better price with the seller, since being pre-approved is a step before full approval. It's almost like having cash in the bank to pay for the house!