You’ll hear both terms early in a home search. They aren’t the same, and knowing the difference can save you from making an offer you can’t finance.
Pre-qualification
A pre-qualification is a quick estimate based on what you tell a lender about your income, debts and down payment. It’s useful for setting a rough budget, but nothing is verified, so it isn’t a commitment.
Pre-approval
A pre-approval goes further. The lender reviews your documents, such as proof of income and down payment, and usually checks your credit with your permission. You get:
- A clearer idea of how much you can borrow
- Often, a rate held for a set period
- A stronger position when you make an offer
A pre-approval still isn’t a final approval. The lender will review the specific property, and your situation needs to stay the same until closing.
Which do you need?
If you’re just starting to look, a pre-qualification helps you set a range. Once you’re ready to make offers, a pre-approval gives you and sellers more confidence.
Avoid big changes, such as a new car loan or a job switch, between pre-approval and closing without talking to your mortgage professional first.
A licensed mortgage professional can walk you through both. Get started with one, at no cost.
