At Virgin Bay Mortgage we often get asked by our clients what’s the difference between a pre-qualification letter vs a pre-approval letter. Below we provide an overview of the differences and why having one or the other is so important when buying real estate in the USVI. Almost every realtor on-island will want some type of assurance that you can afford the property you would like to see…and that’s why these letters are usually the first step in the home buying process. These letters provide valuable insights into your borrowing power and help streamline your homebuying journey. However, it's important to understand the distinctions between a pre-qualification and pre-approval and how they can help you get the home you desire. Below we explore these two terms as well as the pros and cons of each.
The Mortgage Pre-Qualification
A mortgage pre-qualification is a rough estimate of how much you may be able to borrow from a lender and is often based on self-reported information. It is not a thorough examination of your financial situation but does help the lender and realtor identify any red flags and gives an indication of the creditworthiness of the client. Often, the lender will perform a soft credit inquiry to obtain your credit scores from the different reporting agencies and have a conversation with you about your financial health. While a pre-qualification is relatively simple and quick, it's important to note that it is not a guarantee of a loan. It serves as an informal assessment and provides an initial idea of what you might be able to afford.
The Mortgage Pre-Approval
A mortgage pre-approval on the other hand is a more rigorous and comprehensive process compared to pre-qualification. With a pre-approval, you undergo a thorough evaluation by a lender who reviews your financial documents and credit history. This includes providing proof of income, employment verification, bank statements, tax returns, and consent for a full credit check. The lender analyzes these documents and performs a detailed assessment of your financial situation to determine the maximum loan amount you qualify for. A pre-approval carries more weight and reliability than a pre-qualification and provides the highest level of assurance to the realtor and seller of the borrower’s ability to purchase the home.
At Virgin Bay, both pre-qualification and pre-approval letters are prepared for you digitally and can be updated and shared with your realtor right from your mobile device. They can also be updated on the fly and customized for each different property when you are ready to make an offer. If you are considering buying a home or investment property in the USVI and need mortgage financing, reach out to Virgin Bay Mortgage. We have been lending for over 26 years and we know what it takes to get a deal done. Don't hesitate, get pre-qualified or pre-approved today and get the dream home you have been searching for tomorrow!
The chart below outlines the key differences between pre-qualification and pre-approval.
