Pre-Qualification & Pre-Approval Process – What’s the Difference Between Them?
Before Shopping For a Home…
Both mortgage pre-qualification or pre-approval can provide the following information:
- What could my potential loan amount be?
- What could my monthly payment be?
- What could my interest rate be?
What is Pre-Qualification?
Pre-qualification: helpful when you are thinking to buy a property but haven’t yet started.
- Basic financial information
- No fee, no obligation, and no credit check
What is Pre-Approval?
Pre-approval: helpful when you’re actively looking at properties and want to focus your search
- More detailed
- Provides an estimate of your home price range based on an initial review of your application and limited credit information
- Considered stronger than a pre-qualification
- Gives you a more accurate idea of your potential loan amount, monthly payment, interest rate
- It shows sellers that you are a serious buyer as well
- May be a fee for the cost of the credit check
Things to Keep in Mind
Neither pre-qualification nor pre-approval is a commitment to lend.
- Often times, mortgage pre-approval and mortgage pre-qualification are being used interchangeably. Your lender will be in the best position to defines the service. Make sure to ask your lender exactly how she or he defines these two terms and which version is more credible in your market.
- That way when it comes time to make an offer, you’ll have what it needs to give the sellers confidence that you’ll be approved for an eventual loan.