When you are working towards buying a home in Baltimore, your realtor will oftentimes recommend that you meet with a lender to obtain a pre-qualification letter or pre-approval letter. The terms are frequently used interchangeably but there are a few subtle distinctions that we will detail below.
Pre-Qualification Letter. This document is issued usually seen as the first stage of the mortgage application process. At this stage, a lender will ask you questions about your income, assets, debts and credit score. Based on the information you supply the lender will make a preliminary determination of the amount of the loan that you will qualify for. The lender may ask for documentation prior to issuing a pre-qualification letter but that is typically reserved for the pre-approval letter stage.
Pre-Approval Letter. Mortgage pre-approval is very similar to pre-qualification but requires that you submit documentation of your financial history. The lender will verify your income, assets, and debts and will oftentimes run a credit check to verify your credit score. This credit check will result in a hard inquiry and may affect your credit score.
The upshot here? Most agents and sellers just want to know that you have taken some preliminary steps to secure financing and have the ability to close on the purchase so either document will suffice.