Financing Your New Home

What’s the difference between pre-qualification and pre‑approval?

Pre-qualification is not a mortgage approval, but simply an estimate of what you can afford. When you pre-qualify for a mortgage, the lender collects self-reported financial information regarding your income, monthly debts, credit history and assets, and then uses this information to estimate how much house you can afford. Getting confirmation from a lender that you pre-qualify for a home loan provides a general idea of how much you’ll be approved for when it comes time to close.

Pre-approval goes a step beyond pre qualification. Your lender will pull your credit history in addition to reviewing bank statements and various financial documents to provide an estimate of the loan amount and interest rate you’re likely to qualify for. You’ll receive a pre‑approval letter to supply to sellers, demonstrating that a lender has verified your financial information. A pre-approval is a stronger indication of what you can afford and adds more credibility to your offer than a pre-qualification.