Pre-Qualified vs. Pre-Approved: What’s the Difference?

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Pre-Qualified vs. Pre-Approved: An Overview

Most existent property buyers person heard that they request to pre-qualify aliases beryllium pre-approved for a owe if they're looking to bargain a property. These are 2 cardinal steps successful nan owe exertion process.

Some group usage nan position interchangeably, but location are important differences that each homebuyer should understand. Pre-qualifying is conscionable nan first step. It gives you an thought of really ample a indebtedness you'll apt suffice for. Pre-approval is nan 2nd step, a conditional committedness to assistance you nan mortgage.

"The pre-qualification process is based connected consumer-submitted data," said Todd Kaderabek, a residential agent subordinate pinch Beverly-Hanks Realtors successful downtown Asheville, NC. "Pre-approval is verified user data—for example, a in installments check."

Key Takeaways

  • Pre-qualification is based connected information nan borrower submits to a lender.
  • Loan pre-qualification is based solely connected nan accusation handed complete to nan lender, truthful it doesn’t mean overmuch if meticulous information is not provided.
  • The pre-qualified magnitude is only based connected nan accusation provided.
  • The lender won't return a adjacent look astatine a borrower's financial business and history to find really overmuch owe they tin reasonably spend until they scope nan pre-approval stage.
  • The borrower receives a conditional committedness successful penning for an nonstop indebtedness magnitude aft they've been pre-approved.

Investopedia / Sabrina Jiang


Getting pre-qualified involves supplying a slope aliases lender pinch their wide financial picture, including debt, income, and assets. The lender reviews everything and gives an estimate of really overmuch nan borrower tin expect to receive. Pre-qualification tin beryllium done complete nan telephone aliases online, and there's usually nary costs involved.

Pre-qualification is quick, usually taking conscionable 1 to 3 days to get a pre-qualification letter. Keep successful mind that indebtedness pre-qualification does not include an study of credit reports or an in-depth look astatine nan borrower's expertise to acquisition a home.

The first pre-qualification measurement allows for nan chat of immoderate goals aliases needs regarding a mortgage. The lender will explicate various owe options and urge nan type that mightiness beryllium champion suited.

Again, nan pre-qualified magnitude isn’t a judge thing, because it’s based only connected nan accusation provided. It’s conscionable nan magnitude nan borrower mightiness expect to get. A pre-qualified purchaser doesn’t transportation nan aforesaid weight arsenic a pre-approved buyer, who has been much thoroughly investigated.

Pre-qualifying tin nevertheless beryllium adjuvant erstwhile it comes clip to make an offer. "A pre-qualification missive is each but required pinch an connection successful our market," said Kaderabek. "Sellers are savvy and don't want to participate into a statement pinch a purchaser who can't execute connected nan contract. It's 1 of nan first questions we inquire of a potential buyer: Have you met pinch a lender and wished your pre-qualification status? If not, we counsel options for lenders. If so, we petition and support connected record a transcript of nan pre-qualification letter."

Pre-Qualification Letter

Here’s an illustration of what a pre-qualification missive looks like:


Getting pre-approved is nan adjacent step, and it's overmuch much involved. "A pre-qualification is simply a bully denotation of creditworthiness and nan expertise to borrow, but a pre-approval is nan definitive word," said Kaderabek.

The borrower must complete an charismatic owe application to get pre-approved, arsenic good arsenic proviso nan lender pinch each nan basal archiving to execute an extended in installments and financial inheritance check. The lender will past connection pre-approval up to a specified amount.

Going done nan pre-approval process besides offers a amended thought of nan liking complaint to beryllium charged. Some lenders let borrowers to lock successful an liking rate aliases complaint an exertion fee for pre-approval, which tin magnitude to respective 100 dollars.

Lenders will supply a conditional committedness successful penning for an nonstop indebtedness amount, allowing borrowers to look for homes astatine aliases beneath that value level. This puts borrowers astatine an advantage erstwhile dealing pinch a seller because they're 1 measurement person to getting an existent mortgage.

Key Differences

Below is simply a speedy rundown of really pre-qualification and pre-approval differ.

  Pre-qualification Pre-approval
Do I request to capable retired a owe application? No Yes
Do I person to salary an exertion fee? No Maybe
Does it require a in installments history check? No  Yes
Is it based connected a reappraisal of my finances? No Yes
Does it require an estimate of my down costs amount? No Yes
Will nan lender springiness maine an estimate for a indebtedness amount? Yes No
Will nan lender springiness maine a circumstantial indebtedness amount? No Yes
Will nan lender springiness maine liking complaint information? No Yes

Special Considerations

The advantage of completing some steps—pre-qualification and pre-approval—before looking for a location is that it offers an thought of really overmuch a borrower has to spend. This prevents wasted clip looking astatine properties that are excessively expensive. Getting pre-approved for a owe besides speeds up nan existent buying process, letting nan seller cognize that nan connection is superior successful a competitory market.

The borrower gives nan lender a transcript of nan purchase agreement and immoderate different archiving basal arsenic portion of nan afloat underwriting process aft a location has been chosen and an connection made. The lender hires a third-party certified aliases licensed contractor to do a home appraisal to find nan home's value.

Your income and in installments floor plan will beryllium checked erstwhile again to ensure that thing has changed since nan first approval, truthful this isn’t nan clip to spell retired and finance a ample furnishings purchase.

The last measurement successful nan process is simply a loan commitment, which is only issued by a slope erstwhile it has approved nan borrower, arsenic good arsenic nan location successful question—meaning nan spot is appraised at aliases supra nan income price. The slope mightiness besides require much accusation if nan appraiser brings up thing that should beryllium investigated, specified arsenic structural problems aliases a faulty HVAC system.

Getting pre-qualified and pre-approved for a owe gives imaginable homebuyers a bully thought successful beforehand of really overmuch location they tin afford. But astir sellers will beryllium much consenting to discuss pinch those who are pre-approved. Pre-approval besides allows borrowers to adjacent connected a location much quickly, offering an separator successful a competitory market.

Do I Have to Spend nan Amount I’m Pre-Approved For?

No. Keep successful mind that you don't person to shop astatine nan apical of your value range. Depending connected nan market, you mightiness beryllium capable to get into a location you for illustration for little money than you’re approved for, leaving you pinch other rate each period to group speech for retirement, kids’ assemblage funds, aliases checking thing disconnected your bucket list.

Are Pre-Qualification and Pre-Approval nan Same Thing?

Pre-qualification is different from pre-approval. Pre-qualification intends that nan owe lender has reviewed nan financial accusation you person provided and believes you will suffice for a loan. Pre-approval is nan 2nd measurement successful nan indebtedness process, which is simply a conditional committedness to indebtedness you nan money for a mortgage.

Do I Need a Pre-Qualification Letter to Buy a House?

Not ever but it whitethorn thief person sellers and their agents that you are a superior purchaser who will astir apt beryllium capable to get a owe without immoderate trouble.

The Bottom Line

Although they sound nan same, pre-qualified and pre-approved person different meanings. Both are first steps successful nan owe process, pinch pre-qualified being an parameter of nan size of nan owe you'll apt beryllium approved for, while pre-approved is simply a committedness pinch conditions from a lender that you will beryllium approved for a mortgage. Knowing nan quality will thief you move done nan owe process a batch smoother.

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