Most homebuyers know the important benefit of doing their homework on real estate financing before — not after — they find the home they want to buy. It’s best to do this before even starting to look for a new home. In fact, especially with REO (bank-owned) listings, many sellers require the buyer to have already done “their homework” before the seller will even look at an offer.

Once you decide with your lender on the loan program that will work best for you, you may obtain “pre-approval” in writing from your lender.

From this, you will know your interest rate, payment amount and how large a mortgage the lender is willing to make for you. And more importantly, when you eventually present an offer to buy a home, this piece of paper — a pre-approval letter specific to the property — will let the sellers know that you’re already signed off for the purchase money mortgage you’ll need to buy their home (subject to an appraisal of the house, of course). This gives your offer a huge additional amount of credibility!

But what about getting a letter of “pre-qualification” from a lender? Is that the same thing? Not at all.

A letter of “pre-qualification” simply tells you that a lender believes it will be able to obtain a mortgage for you in the stated amount. This determination is very cursory and is based only on a standard loan application. It doesn’t mean you’ve been approved for that loan, nor does it certify that the lender will loan you the stated amount. In short, it doesn’t mean much at all.

So, it’s always better to get “pre-approved,” not “pre-qualified,” if you want to give your offer more authority and add that extra punch.

Paul Suding, a real estate agent with Cool Santa Barbara Homes and Village Properties, is president of the Santa Barbara Association of Realtors. He can be contacted at or 805.455.8055.