Pre-approval vs. verified pre-approval: What homebuyers need to know
Jan. 27, 2023
4 min read
What we'll cover
Types of mortgage pre-approvals
The benefits of mortgage pre-approval
The difference between pre-approval and verified pre-approval
When you find the house you’re ready to call your home, you want to put in an offer right away. But first, you have some processes to follow and financials to square away. In the meantime, there’s a chance another homebuyer could get their bid in before you.
In a competitive market, a mortgage pre-approval can give you a head start. With a pre-approval in hand, you can let the seller know you’re financially prepared to take on the mortgage, but if there are other potential buyers or you’re hoping to move quickly, you might be looking for even more of an edge.
A verified pre-approval is a more thorough evaluation of your creditworthiness and can help you stand out. If you’re not sure which is the right fit for you, don’t worry. We’ve broken down both types and how they can help you accomplish your goal of purchasing a home.
What is a mortgage pre-approval?
A mortgage pre-approval – or mortgage pre-qualification, depending on your lender – enables you to receive documentation from a lender estimating how much money you can borrow to buy a home. Based on the financial information you provide the lender, including estimated income, debts and assets, you will get an idea of how much house you can afford, but you won’t be asked to submit documentation. Pre-approval may also involve a credit check. In general, the pre-approval process is faster than a verified pre-approval but can vary from lender to lender.
Tip: You can get pre-approved in as little as 3 minutes with Ally Home.
What is a verified pre-approval letter?
Although you may hear the terms used interchangeably, a verified pre-approval letter (VPAL) is different from a basic mortgage pre-approval. While a pre-approval may rely on verbal and written estimates, a verified pre-approval requires more thorough documentation of your finances. Your income, assets and credit history will be verified by an underwriter, and you will likely have to provide W2s, income tax returns, pay stubs and bank statements. Expect a hard credit check, as well. It might include some extra steps, but a verified pre-approval letter shows you’re a serious buyer who’s ready to take on a mortgage.
Benefits of a verified pre-approval letter
When it’s time to buy a home, you want to be as confident as possible. With a verified pre-approval letter (VPAL), you’ll look like a stronger buyer, providing the seller with peace of mind that your lender has evaluated your creditworthiness and your financing is more likely to be secure. And if there is a bidding war, a VPAL can give you a competitive edge. Even in a buyers’ market, this form of pre-approval signals your seriousness to a seller.
When does it make sense to apply for a VPAL?
For serious buyers who are ready to purchase a home, a VPAL can make the homebuying process easier and faster, especially if you’re ready to make offers and are confident you’ll be purchasing a home within the next 90 days.
Tip: Depending on your lender, your pre-approval letter or your verified pre-approval letter will be valid for 30-90 days. A VPAL from Ally Home is valid for 90 days.
A VPAL also may be useful if you are a first-time homebuyer or plan on adding a co-signer to your mortgage. The VPAL will give you a clearer picture of what you (and your potential co-signer) can afford based on your financial situations and credit scores. And remember that when co-signing, both of your credit scores could be affected if you and your co-signer miss loan payments.
Verified pre-approval at Ally
As you consider your options, keep in mind that every lender will have different requirements and processes for VPALs. At Ally, we offer a variety of loan options with no lender fees and have just introduced VPAL for conventional and jumbo loans. You can complete the pre-approval process online, and when you apply for a VPAL, a Home Loan Expert will thoroughly review and verify the required documentation. Once you have your verified pre-approval, you can complete the rest of the loan process completely online.
It’s important to know even with a VPAL, a mortgage is not guaranteed. At Ally, we will still need to obtain an appraisal, conduct a title search and verify you have sufficient homeowner’s insurance.
Gain confidence with a pre-approval
It’s easy to get swept up in the excitement of buying a new home. But before you get too far into planning your decor and booking movers, it’s important to consider your mortgage loan. With either a basic mortgage pre-approval or a verified pre-approval letter, you can increase your chances of scoring your dream home. Take the time to consider which option is right for you, and enter the homebuying process with confidence.