Pre-Approval vs. Pre-Qualification: What’s the Difference?

When you decide to buy a home, it's important to understand the various steps involved in the homebuying process. One of the most important steps is to secure financing for your new home. Two terms that you will hear often when applying for a home loan are pre-qualification and pre-approval.

What is Pre-Qualification?

Pre-qualification is the initial step in the mortgage process where a lender will evaluate your financial information and give you an estimate of how much you might be able to borrow. This evaluation is typically based on information provided by the borrower and does not require a credit check or verification of income or assets.

What is Pre-Approval?

Pre-approval, on the other hand, is a more in-depth evaluation of your financial information that gives you an actual loan commitment from a lender. To get pre-approved, you will need to provide detailed financial information and the lender will also perform a credit check and verify your income and assets.

Key Differences between Pre-Qualification and Pre-Approval

The key difference between pre-qualification and pre-approval is that pre-qualification is an estimate of how much you might be able to borrow based on information provided by you, while pre-approval gives you an actual loan commitment from a lender based on a detailed evaluation of your financial information.

Which is Right for You?

Which option is right for you will depend on your individual circumstances. If you're just beginning the homebuying process and want an idea of how much you may be able to borrow, pre-qualification may be a good place to start. However, if you're ready to make an offer on a home and want to show sellers that you're a serious buyer, then getting pre-approved is the way to go.