The Difference of Pre-Approved & Pre-Qualified for a Mortgage

shutterstock_23248399Buying a home is a long and complicated process. Lenders will dive into your past and examine your finances, credit report and determine what kind of risk you are before giving you a mortgage. With all of the different steps involved it is easy to get bogged down in the terminology of the entire procedure.

Two of the most common phrases are Pre-Approved and Pre-Qualified. They are tossed around like wild fire by lenders to try and get you to engage with their company. But not knowing the difference between the two could cost you the home of your dreams.

The two terms are very similar but mean very different things. Let’s dive in and shed some light on both phrases and what they mean to you in your home search.


This is actually the first simple step in the mortgage process. Many people think once they are pre-qualified they are ready to buy a house, but nothing could be further from the truth.

Pre-qualification occurs when you open a dialogue with a lender and provide them with information about your finances. The lender makes a judgment call based on the information you have provided them and provides an estimate of the mortgage amount you may qualify for.

But the problem here is, the lender is not running an analysis of your credit report or really taking a long look at your ability to repay a mortgage. Most of the time it can be done over the phone and is designed to reel you in to discuss different loan types and options. Because it is based on the information given by you to the lender, it is far from a sure thing.


This is actually the second step in the mortgage process. It is also much more involved. A full mortgage application and usually an application fee will be given to the lender. At that point, the mortgage company will run an extensive check of your finances and credit report.

If you are deemed worthy, the lender will issue you an approval letter with an amount and an interest rate they are comfortable with. That way, you will know exactly how much house you can afford to purchase. It is also the time to begin shopping and thinking of making an offer on a house.


The difference from Pre-Qualified and Pre-Approved is really a matter of commitment. With Pre-Approved, there is a commitment from the lender that they will give you a mortgage at or below the approval amount. This will give you a leg up over other buyers in the market that might be shopping with a Pre-Qualification.

An offer submitted with Pre-Approval is not contingent on obtaining financing. It shows you are serious to the seller and could prevent you from losing a house to another buyer if you were only pre-qualified.

For more information and real estate news, please check out our blog.

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