Mortgage pre-qualification vs. preapproval

Two distinct steps in the homebuying process defined

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If you’ve been considering buying a home, you’ve probably been advised that you need to be preapproved or pre-qualified to access a mortgage. While these terms are sometimes used interchangeably, they are two very different processes. As a homeowner, it’s essential to know the difference.

Mortgage pre-qualification

Mortgage pre-qualification is one of the first steps you can take in the journey to homeownership. When you receive mortgage pre-qualification, you learn how much money you might be able to borrow for a home. The lender decides this amount based on your finances and the results of a soft credit check, which doesn't affect your credit score.

Pre-qualification is especially useful if you're a first-time homebuyer — it can help you gain access to information about your various mortgage options. This is also the time to work with a lender to find out which mortgage is most likely to meet your needs and fit your goals both now and in the future.

When the lender reviews your information, it estimates the amount you may be eligible to borrow to purchase a home. Since this is a more informal part of the process, it’s often done online or over the phone and typically has no associated fees. It can be valuable, though — many sellers want to see a pre-qualification before moving to the next steps.

Pre-qualifying focuses on data that you submit of your own accord. This can make it a helpful step in learning about your options, but make sure you provide accurate details — this is the only way to ensure your estimate is correct.

Mortgage preapproval

An offer letter from your lender is typically good for 60 to 90 days.

A mortgage preapproval is a more in-depth process than a pre-qualification. At this step in the process, you confirm that you have the required credit, income and other qualifications to buy a home. This process helps ensure that when you find the home of your dreams, you have the opportunity to purchase it.

The preapproval step occurs after pre-qualification. You will fill out a mortgage application, and your lender will verify the information's accuracy. Be prepared to provide financial documents, including recent pay stubs, tax returns and bank statements. At this time, the lender will also perform a hard credit check.

If it turns out that you’re preapproved, you’ll receive a letter alerting you. This is known as an offer letter and shows how much money you can borrow from the lender, the interest rate and other important details. The offer letter is typically good for 60 to 90 days.

Pre-qualification vs. preapproval: a comparison

Pre-qualification is a first step for anyone who’s considering purchasing a home, while preapproval is for someone further along in the buying process. Both these processes can give you insight into how much you can spend on a home.

Pre-qualification is an excellent place to start, but many potential buyers will want to move into preapproval for firmer answers regarding their interest rate and the specifics of their loan options from a particular lender.

Below are some of the differences between mortgage pre-qualification and preapproval.

No need to fill out a mortgage applicationA mortgage application is necessary
Lenders don’t provide interest rate infoLenders show you interest rates
Rarely a feeSome lenders charge fees
Shows estimate of how much you can borrowDetails how much you can borrow and at what rate

View rates from leading lenders now.

    Bottom line: Do you have to get pre-qualified first?

    Pre-qualification isn’t required to purchase a home. However, it can be helpful — it’s a quick process that requires no credit check or excessive digging into your finances, and it shows you how much you might be able to borrow.

    Preapproval puts you more firmly on the road toward owning a home. At this step, lenders can provide more specific loan details, including your interest rate, and you can compare lenders to find the right one for your circumstances.

    If you’re early enough in your home search, it can be smart to complete both pre-qualification and preapproval; this gives you an idea of how much you can afford to spend on a house before starting your search. Remember, a preapproval letter lasts for around 60 to 90 days, so only seek preapproval when you’re ready to make an offer.

    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. Bank of America, “ Two smart homebuying moves: mortgage prequalification and preapproval .” Accessed Jan. 12, 2022.
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