Get pre-approved before you write the offer.

The full guide

Pre-qualified vs pre-approved: what Chicago sellers and listing agents want to see.

The two words sound alike, and lenders don't all use them the same way. A seller cares about what the lender actually checked and whether the letter fits the offer on the table.

The labels mean different things at different lenders

The CFPB says lenders use "prequalification" and "preapproval" differently. Some base a prequalification on information you report without checking it, and issue a preapproval only after they verify it. Some go further and give you a written commitment that's good for a set period, subject to limited conditions. The CFPB also says neither letter is a guaranteed loan offer. Source: CFPB, prequalification vs. preapproval letters.

So the word at the top of the letter tells a seller very little. Before you rely on one, ask your lender what they looked at before they signed it.

What a pre-qualification is good for

Early on, a pre-qualification does its job. Say you're six months out and want a rough price range, or you're wondering whether a two-flat in Avondale or a condo in Lakeview is realistic. A short conversation about your income, debts and savings can answer that.

Nothing in it has been verified, though. If part of your income is bonus, commission or self-employment, the amount a lender can count may come in lower than what you'd guess. We'd rather you learn that at your kitchen table than in the middle of attorney review.

What a pre-approval checks

A real pre-approval starts with a credit report and your documents. That means recent pay stubs and W-2s (or tax returns if you're self-employed), bank and retirement statements showing the down payment and closing costs, and an explanation for any large deposits. The lender runs the file through an automated underwriting system, such as Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor, which comes back with a finding and a list of conditions.

A fully underwritten pre-approval goes a step further. An underwriter reviews your income, assets and credit before you make an offer. That's how we do pre-approvals at Team Perks. Final approval still depends on the home and the remaining loan conditions: the appraisal, title, insurance and, for a condo, the building review.

What Chicago listing agents look at in your letter

When an offer comes in, the listing agent wants to know whether the buyer's loan will close by the date in the contract. Your letter is the first thing they have to go on, and most agents read it for the same details:

• Who wrote it, with a name and a phone number a person answers. Plenty of listing agents call the loan officer before they respond to an offer.
• The date. A letter from last spring suggests nobody has looked at the file since.
• The loan type. FHA, conventional, VA or jumbo can matter to a seller, especially on a condo, where the building has to meet the program's rules. Our guide to Chicago condo financing covers that review.
• The price and down payment. These should match the offer. If you're offering below your maximum, ask us for a letter at the offer price so the seller doesn't see your ceiling.
• The conditions. A short list of property items reads very differently from one that still says "verify income" and "verify assets."

Sellers also weigh your earnest money and your closing date, so the letter is one piece of the offer. A checked letter from a lender who picks up the phone makes the rest of it easier to say yes to.

Why it matters more once you're under contract

Chicago-area purchase contracts usually include an attorney review period and a mortgage contingency with its own deadline for loan approval. Your contract sets those dates, and your attorney and agent will walk you through them. If an underwriter has already reviewed your income and assets, most of what's left after the contract is signed is the appraisal and the property paperwork. That gives the loan a better chance of meeting the contingency date without asking the seller for more time.

The contract is also when you decide on locking your rate, so have that conversation with us before attorney review ends.

Credit checks and shopping more than one lender

You can compare lenders without taking a hit for every credit pull. The CFPB says multiple credit checks from mortgage lenders within a 45-day window are recorded on your credit report as a single inquiry. Source: CFPB, what happens when a mortgage lender checks my credit.

After you apply, each lender has to give you a Loan Estimate within three business days. Source: CFPB, what is a Loan Estimate. Put them side by side. Our guide on how to compare Loan Estimates shows which lines to read first.

Keep the pre-approval current

A pre-approval is only as good as the paperwork behind it. Fannie Mae requires credit documents, which include the credit report and your income and asset paperwork, to be no more than four months old on the note date. Source: Fannie Mae Selling Guide B1-1-03. If your search runs into a new season, expect us to ask for fresh pay stubs and statements.

Between the letter and the closing table, keep your finances the way they were when we approved them. Talk to us before you change jobs, open a new card, finance furniture or move money between accounts. A large deposit with no paper trail can hold up an approval while we document where it came from.

Using down payment help? Those programs have their own approval on top of the loan, and our page on first-time buyer programs in Chicago lists what each one requires. If you haven't set a budget yet, start with how much house you can afford in Chicago, because Cook County taxes change the answer.

Common pre-approval questions

Is a pre-qualification the same as a pre-approval?

Not always. Lenders use the two words differently. The CFPB says some lenders base a prequalification on information you report without verifying it and issue a preapproval only after checking it. Ask your lender what they verified.

Does a pre-approval guarantee my loan?

No. The CFPB says neither letter is a guaranteed loan offer. Final approval still depends on the property, including the appraisal and title, and on any remaining loan conditions.

Will getting pre-approved by more than one lender hurt my credit?

Less than you might think. The CFPB says multiple credit checks from mortgage lenders within a 45-day window are recorded on your credit report as a single inquiry.

How long is a pre-approval good for?

It depends on the lender, and the documents behind it age. Fannie Mae requires credit documents to be no more than four months old on the note date, so a long search usually means sending updated pay stubs and statements.

Should my pre-approval letter show my maximum price?

Usually not. Ask your lender for a letter at the price you're offering. The listing agent sees that you can buy this home without seeing how much more you could spend.

What is a fully underwritten pre-approval?

An underwriter reviews your income, assets and credit before you make an offer. Once you're under contract, what's left is mostly the property: the appraisal, title and insurance.