Mortgage Pre-Qualification vs Mortgage Pre-Approval

When you’re at the beginning of the process of buying a home, you’ve learned that you need to be pre-approved or pre-qualify for a mortgage.

Many people believe these two words mean the same thing and use them as such, but there are essential differences between them.

In this article, we’ll review the differences between the two and some other questions potential homebuyers have about pre-qualification and pre-approval.

What Is Pre-Qualification?

Pre-qualification is the first step in the home loan process and gives you an idea of what amount of money you can expect in a loan. The pre-qualification process relies upon data you submit to an online form to provide a ballpark estimate of how much house you can afford. Since you’re estimating some of the information, it’s often less reliable as it doesn’t involve verified financial documents or your credit report. If there is a credit check during the pre-qualification process, it’s a soft inquiry that usually doesn’t affect your credit score.

What Is Pre-Approval

Pre-approval is a process that provides a definitive answer as to how much you can borrow as well as the interest rate you’ll have for the loan. The pre-approval process speeds up the buying process and requires you to submit various financial documents to a lender for proof of financial history and financial stability. The lender will also check your credit score and credit report in what’s considered a hard inquiry, which lowers a credit score by a few points. As well as checking your income, a lender will verify your employment, income, and whatever debts and assets you have.

Do You Require A Pre-Qualification Letter To Buy A House?

While it’s not required that you have a pre-approval letter to buy a house, it does make the process easier. Having a letter on hand helps convince agents and those selling their homes that you’re serious about looking for a home and are likely to obtain a mortgage quickly. Without one, you’re someone who might have an interest but isn’t looking for one right now.

Why Is Approval an Important Step In The Process?

Approval for a mortgage proves that a lender has reviewed your finances and believes you can handle mortgage payments. Once you have approval, those selling their home, and real estate agents, know you’ve gone through the process and that you’re serious about purchasing a home.

Do You Have To Spend The Whole Pre-Approval Amount

No, you don’t have to spend the entire amount listed in the pre-approval. In fact, it’s smart not to shop at the very top of your price range so you can have more money left over for home maintenance, vacations, retirement, a college fund for your kids, or savings.

If you’re ready to buy a home but you’re not sure where to start, we can help. We have a fast and easy application process that provides a free personalized rate quote. Reach out to us if you have any questions by filling out our online form or calling us at 1-800-332-9221.


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.