In the sellers market we are experiencing here in Northen Colorado, along with a very limited inventory of affordible housing, competition is fierce. There seems to be a lot of confusion and misunderstanding of the difference between being prequalified and pre approved. What is the difference and why does it really matter? PREQUALIFICATION: When a buyers goes to a lender, they want to see how much home they can afford based on their income and financial history. The lender will ask some general questions about your employment, monthly or yearly income, outstanding debts (usually general figures), how much are you putting down in cash and put together an average number of what the banks will loan you. This is where the buyers gets a prequalification letter with a dollar figure the lender could possibly loan you. It is by all means a loose number. PRE-APPROVAL: The buyer is ready willing and able to buy. He goes to his lender and starts the process to be pre-approved. The lender will ask for detailed information such as: Employment History, pay stubs, outstanding debts, number of assets you have, savings, money you can verify that you will put as a down payment, your SS# to generate a FICO score along with several other requirements. This is called doing your due diligence. Once everything is verified, the lender will give you the exact loan amount you qualify for and will have ready and waiting for you once you have your offer accepted. Why is this important? When you are competing in a multiple offer situation, and you have done your due diligence and finalized what the lender will loan you, the listing agent when reviewing multiple offers should recognize, (you) the buyer has gone the distance and completed their end. (No guess work left). With competing offers that have a prequalification letter and not a pre-approval letter attached with them states the buyers would still need to go through the lender to complete all the necessary paperwork for a loan. There could possibly be something there that might not allow a lender to loan the amount needed. This could delay closing or completely kill the deal and sellers would need to start from square one. (Time and money lost). So the age old adage of “One in the hand is worth two in the bush” can certainly apply in these situations. For more information, call me at 970-631-3360 or click on the Contact Me link on my web site.