Pre-Qualification vs Pre-Approval

Pre-Qualification vs Pre-Approval 

Although these two terms sound like they can be used interchangeable, they are extremely different. However, both are important when looking to buy a home.


Getting pre-qualified is the first step in the mortgage process – and it’s generally fairly simple. The pre-qualification process can be done over the phone – you supply a bank or lender with your overall financial picture. After taking a quick look at this information, a lender can give you an idea of the mortgage amount for which you can qualify. Loan pre-qualification is very quick and usually no cost involved, however, it does not include an analysis of your credit report. Although an important step in buying a home, pre-qualification does not look in-depth at your ability to purchase a home.

Some people would say the pre-qualification process is worthless, but we don’t think so. The initial pre-qualification step allows you to discuss any goals or needs you may have regarding your mortgage with your lender. At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation.

Because it’s a quick procedure – and based only on the information you provide to the lender – your pre-qualified amount is not set in stone; it’s just the amount for which you might expect to be approved. For this reason, being a pre-qualified buyer doesn’t carry the same weight as being a pre-approved buyer who has been more thoroughly investigated.


Getting pre-approved is the next step in the mortgage process, and it tends to be much more involved. You will complete an official mortgage application and supply the lender with documents that are necessary for an extensive check on your financial background and current credit rating. From this, your lender can tell you the specific mortgage amount for which you are approved. You will also have a better idea of the interest rate you will be charged on the loan.


With pre-approval, you will receive a conditional commitment in writing for the exact loan amount. This will allow you to look for homes that are at or below your price level. This, for obvious reasons, puts you at an advantage when dealing with sellers, as they will know you’re one step closer to obtaining an actual mortgage.

Another advantage of getting pre-qualified and pre-approved is that you’ll know in advance how much you can afford before you start looking for a home. This keeps you from looking at homes that are beyond your means. When you’re ready to find a home, the last thing you want to do is limit your possibilities. Dream big, right? But you’d be totally bummed if you found a perfect pad, only to learn you don’t qualify for the home of your dreams.

Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing the home to another potential buyer who already has financing arranged.