Mortgage Pre-qualification or Pre-approval: What's the Difference?

Annual percentage rate. Points. Closing costs.

As anyone who has ever applied for a mortgage knows, there sure are a lot of terms thrown at you. Two terms that are often talked about — and confused — are mortgage pre-qualification and pre-approval. Although they sound alike, they are different in many ways.

Mortgage Pre-qualification 

Before you begin shopping for a home, it's important to understand how much you can afford. A mortgage pre-qualification will help make that easier. You simply provide a mortgage lender with information about your finances, such as your income, assets, and debt, and they'll let you know the mortgage amount for which you might qualify. Pre-qualifications don't require verification from the lender, so you can get pre-qualified in minutes, usually over the phone or online. A lender may generate a letter indicating the amount you are likely to be qualified for. It's simply an estimate based on the unverified information you provided.

Mortgage Pre-approval 

Unlike a pre-qualification, which is simply an estimate based on information you provide, a preapproval is a conditional approval subject to underwriting and creditworthy criteria with the exception of identifying suitable collateral. To be considered for a preapproval, a lender will need you to provide certain information, such as:

Proof of income — including pay stubs, tax returns, or W-2s. Proof of assets — including bank and other account statements. Credit — lenders will check your credit score. Proof of employment — a lender will contact your employer to verify you are still employed.

After a comprehensive analysis, a lender will issue a written commitment valid for a designated period of time to extend a loan up to a specified amount. It is important to note that like a pre-qualification, a pre-approval does not constitute a final mortgage approval. It is still subject to limited conditions such as the identification of a suitable property and no substantial changes have occurred in your financial condition or creditworthiness.

Two valuable tools to help you purchase a home

Though they differ, pre-qualifications and pre-approvals do have something important in common — they are both valuable tools in helping you purchase a home. A pre-qualification can help you focus on finding homes in your price range.

Ready to move forward?

Contact any of our Mortgage lenders today to get started and make your dreams of homeownership a reality!

Subject to credit approval. Terms and conditions are subject to change. Speak to an officer for details.