The difference between pre-approval and pre-qualification

Our team of licensed loan officers understands that the process of applying for a mortgage can be confusing, especially for first-time homebuyers. Two terms that often come up in the mortgage application process are pre-approval and pre-qualification. While these terms may seem interchangeable, they actually refer to two different steps in the process!

Here we will explain the differences between pre-approval and pre-qualification to help you understand which step is right for you.

Pre-Qualification: Pre-qualification is the first step in the mortgage application process. It is a quick assessment of your financial situation and creditworthiness, based on the information you provide to the lender. This information may include your income, assets, debts, and credit score. Pre-qualification does not require a hard credit check or a detailed review of your financial documents.

Pre-qualification is useful for getting a general idea of what you can afford when shopping for a home. It can also help you determine whether you are eligible for certain loan programs. However, pre-qualification is not a guarantee of approval for a mortgage, nor does it provide an accurate assessment of your purchasing power.

Pre-Approval: Pre-approval is a more rigorous process than pre-qualification. It requires a formal application, a credit check, and documentation of your financial situation, including your income, assets, debts, and employment history. Pre-approval provides a more accurate assessment of your purchasing power, as it considers your creditworthiness and financial situation.

The pre-approval process typically takes longer than pre-qualification, but it provides a more accurate assessment of your eligibility for a mortgage. Pre-approval can also give you an advantage when shopping for a home, as it demonstrates to sellers that you are a serious buyer with financing already in place.

In summary, pre-qualification is a quick and easy way to understand what you can afford when shopping for a home. Pre-approval, on the other hand, is a more detailed assessment of your financial situation and provides a more accurate overview of your purchasing power. If you are serious about purchasing a home and want to be taken seriously by sellers, pre-approval is the way to go. However, if you are just starting to explore your options, pre-qualification may be a good first step. As a mortgage lender, we are ready and available to discuss your options and determine which step is right for you. Click the contact button above and we’ll help you begin your homeowner journey!