Why Are Pre-Approval Rates Sometimes Different Than Approval Rates?

The market has started to tier pre-approval rates from approval rates.  This is due to the fact that pre-approvals tend to be held a longer time frame than approvals, which the lender runs more risk on the rates the longer they have to hold them.  Also, lenders have to hold aside a percentage of funds for pre-approvals to make sure they can honor that rate and if the pre-approvals don’t go ahead then they did not utilize their funds properly which leads to cost.