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What is the difference between a pre-qualification and a pre-approval?

A pre-qualification is a letter from a lender stating that, based on your income and a rough idea of your expenses, you may qualify for a certain loan amount. This is subject to a full credit check and supplying the necessary paperwork. A pre-qualification is not a guarantee that you will be able to obtain financing, it is solely an estimation of what you could afford. A pre-approval means you have already submitted a loan application and most of the necessary paperwork to obtain a mortgage. Your credit has been checked, and your mortgage is already approved. All you'll need to do then is find your new home. Being pre-approved gives you a distinct advantage when making an offer on a property. A seller is more likely to accept an offer when they know you will not have a problem getting a loan. It also makes the process much easier on you. Once you find a home, you'll want to concentrate on planning your move, not worrying about whether your loan will be approved.

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