Why might a borrower seek pre-approval instead of just pre-qualification?

A borrower might seek pre-approval instead of just pre-qualification primarily because pre-approval is a more formalized and thorough process conducted by the lender. When a borrower receives pre-approval, it indicates that the lender has not only reviewed their financial information but has also verified key documents such as income, assets, and creditworthiness. This verification provides a clearer picture of how much the borrower can afford, and it demonstrates to sellers that the borrower is serious and credible when making an offer on a property.

While pre-qualification might give an initial estimate of how much a borrower could afford based on self-reported information, pre-approval carries more weight because it involves a deeper dive into the borrower’s financial situation. This distinction makes pre-approval a vital step for serious home buyers as it can provide them with an advantage in competitive real estate markets.