It’s very true that often times prospective home buyers will apply for a mortgage before shopping for a home. This is an essential step in the home buying process can help save you much needed time and stress through this process. When it comes to getting pre-approved and pre-qualified, it’s probably more beneficial to be pre-approved, as it gives a more specific pre-offer as to what terms you can qualify for and the loan amount you will be eligible to take out.

What are some benefits of getting a pre-approval?

1. You can save time by looking at homes you know you can afford.
2. Have more time looking for the right dream home for you.
3. Gain some confidence without being confused about what you can and cannot qualify for.
4. Have power when bargaining.
5. Enjoy a faster closing period!

The two terms pre-qualification and pre-approval are often confused when looking to get a mortgage to buy a home. Loan officers and real estate agents might use them improperly at times, but they are slightly different. Below is a little information about the pre-qualification and pre-approval process.


A mortgage pre-qualification in short terms is the estimate of how much you’ll be able to afford on a loan. This estimate will help determine the amount the lender will lend to you. The best time to attempt the pre-qualification is generally time at the beginning of the home buying process, before you even start looking at houses.

Pre-qualification begins with sitting down with the lender, or perhaps talking on the phone to provide your information on your income, assets, debts, and ability to pay a down payment. After that, the lender will provide you with an estimate on how much they think you can afford for a monthly mortgage payment based on the information you had provided. Keep in mind that there is no fee for this and it is not a commitment to purchase on your behalf. This is simply the stage of the process that establishes your price range you can afford.


The pre-approval is more of an unsure or undecided commitment from a specific lender. During this process, you’ll provide a lender with the actual documents that list your income, assets, and debts. This process will generally require an application fee as well, since the lender will be running your credit and will be working to confirm all of your personal finances such as employment and financial information. Once you’ve been verified to be eligible for a specific loan, the lender will give you a letter of commitment. This document provides the amount the lender is willing to lend to you in writing. With a pre-approval you can begin shopping for a specific home of your dreams now that you have a specific price range. A seller might take someone with pre-approval more seriously than other people who are simply just looking for a home without the guarantee of a specific loan.

Remember that pre-approval is not at all an exact guarantee for a mortgage loan. Funding for a loan will be provided once the lender get’s the information of the property appraisal, title search, and other verifications on the home you’re looking at. The pre-approval is not binding, but just a price range to look at. You’ll still be able to switch to another lender if you do choose to. But if you stick with the company you got a pre-approval on, getting actually approved for the mortgage will be quicker because they already have your information.

It’s in the best interest of any potential borrower to obtain the pre-approval letter as soon as you’re ready to search for a home. You’re information will be rendered by a lender based on the information you submitted, and your credit reports.

Almost all banks will do a pre-qualification or pre-approval. With both of the steps, you’ll need to provide certain financial information including:

– Documents used to verify income such as Paycheck Stubs 0or profit and loss statement if self-employed
– Tax statements
– Information on credit history

Pre-qualification and pre-approval helps:

– Gives you a rough estimation
– Gives you time to rethink your house
– Gives you leverage when bidding on a home
– Keeps the seller from making a misjudgment on your situation

Mortgage Guarantees

The pre-approval letter generally can be looked at as the beginning of the mortgage process, where the lender begins to deeply look into the borrower’s financial situation. Again, it is not a guarantee, and does not at all mean the borrower will get the mortgage. It’s also a hint to the borrower that he or she should be extra sure that he or she can afford the mortgage, and that all the information they provided was a hundred percent accurate.

So to conclude, a pre-qualification is merely estimation for a mortgage you might be able to qualify for. A pre-approval is more of a firm guarantee plus an estimation, although not a full guarantee. Both will benefit you in allowing yourself to know what you can possibly get yourself into.

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