Pre-Qualified or Pre-Approved? What Davis County Buyers Need Before Touring Homes

Pre-qualification is a quick estimate based on what you tell a lender. Pre-approval is a closer review where the lender checks your documents and credit, then gives you a letter stating how much they are willing to lend, subject to conditions. For a Davis County buyer ready to make offers, pre-approval is the one that counts.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. When I am your agent, your loan comes from your own lender, and I do not give lending advice on that deal. What I can do is tell you what to ask and what to have ready, and that is what this article covers.

Lenders use these terms in slightly different ways, so ask yours what they mean by each one.

A pre-approval letter does three jobs. It tells you what range to shop in. It tells a seller you can follow through. And it gives you time to fix problems while you still have time to fix them.

Many sellers in Davis County ask to see a letter with the offer, and a buyer without one is often put behind a buyer with one. It is also easier to decide on a home when you know your numbers. Without them, you tour houses you cannot buy, or skip ones you could.

Lists vary by lender and by loan type, so treat this as a typical starting point and ask your lender for theirs.

• Recent pay stubs and W-2 forms, or tax returns if you are self-employed.
• Bank and savings statements for the last couple of months.
• A photo ID and your Social Security number so they can check your credit.
• A list of your monthly debts.
• If you are using gift funds, a gift letter and where the money comes from.
• If you are on active duty or a veteran, your service documents.

Self-employed buyers should expect more paperwork, and should start sooner. Tell the lender about any big change in work, such as a new job or a move to commission pay.

A lender pulls your credit report. Credit checks for a mortgage made close together are often treated as one inquiry for scoring purposes, though the details depend on the scoring model. Ask your lender how this works so you can compare lenders without worry.

What matters more is what you do after you apply. Keep your credit steady until the loan closes. Avoid opening new accounts, financing a car, moving money around without a paper trail or missing a payment. Those moves can change your approval, even weeks after the letter.

Letters have an expiration date, often a matter of weeks to a few months, and the lender will tell you the date. Changes in your income, debts, credit or the interest rate market can change what the lender will approve.

Rates move. A letter shows what you qualify for under the terms of that day, and your final rate is set later. Do not assume the numbers on a letter are the numbers at closing. Ask your lender when and how a rate can be locked, and what it costs.

Bring a short list of questions.

1. Which loan types do you offer, and which fit my situation?
2. How much cash do I need at closing, including the down payment?
3. What closing costs should I expect?
4. How long will it take from contract to closing?
5. Do you have experience with my kind of income?
6. What would make my approval change?

Ask two or three lenders the same questions. Compare the answers and the estimates in writing. A lender who explains clearly now will usually explain clearly later.

The number on the letter is the most a lender will lend. It is not a target. A monthly payment that fits on paper can still feel tight after taxes, insurance, utilities, maintenance and the rest of life.

Build your own budget first. Subtract your real monthly costs and decide what payment leaves breathing room. Then look at the letter. If the letter is higher than your comfort number, shop to your number.

This is a typical example, not a client story. A buyer plans to tour homes in Layton and Kaysville in the spring. In the fall, she talks to two lenders, gathers her documents and receives a pre-approval. Her lender points out a small credit card balance that is lowering her score. She pays it down, and her estimate improves. By spring, she tours with a letter in hand, knows her comfort number and writes her first offer without scrambling for paperwork.

Does pre-approval cost money? Ask your lender. Some charge nothing at this stage, others may charge for a credit report.

Can I get pre-approved and still change lenders? Yes, but you will need to start the process again with the new lender.

Is pre-approval a guarantee? No. The final loan approval depends on the home, the appraisal and your documents staying the same.

When should I start? Before you tour, and sooner if you are self-employed or fixing credit.

What about first-time buyers? See our first-time buyer page for the full path.

Start by listing your documents and talking to a lender. If you want help picking the questions, or want to see how your budget fits Davis County, reach out here. You can also read about buying a home and the Kaysville and Farmington area pages.

This article is general information, not lending, legal or tax advice. Terms and rates depend on your lender and your situation.