Pre-Qualification vs Pre-Approval

How loan pre-qualification is different from loan pre-approval?

Before you make an offer to buy a home, be sure your financial affairs are in order by getting pre-approved or pre-qualified for a mortgage loan. Either scenario puts you in a stronger position as a buyer, but they mean different things.


What does it mean to get pre-qualified?

When you are pre-qualified for a home loan, you provide a lender with approximate income, current debts and any important details from your credit history. The lender uses these figures to calculate how much money you may be eligible to borrow. You may receive a Conditional Qualification Letter, which determines your likelihood of obtaining a loan. However, all information submitted during pre-qualification is subject to verification at the time your actual loan application is submitted. Because your financial situation has yet to be verified, there is no guarantee of a home loan.


What does it mean to get pre-approved?

Typically, pre-approval means that your financial situation has been verified by the lender. When you get pre-approved, you fill out a mortgage loan application and may have to pay an application fee. After an extensive examination of your financial situation, your lender will commit in writing to fund your loan, pending a successful appraisal of the home and a few other conditions.


But I haven’t found a house yet…

Just because you’re pre-approved for a mortgage loan doesn’t mean you have to borrow the money. However, the lender must stand behind his written loan commitment unless something changes with your situation. In today’s competitive market, getting pre-approved gives you a competitive advantage as compared to other buyers that are not.


Why would the lender change his mind?

There are some things that could cause a lender to withdraw from providing a loan after a pre-approval letter is issued. If your credit situation changes between your pre-approval and the loan’s funding, the lender could change your interest rate or even deny the loan application. So, while you’re buying a house, abstain from applying for credit cards or other loans.


Don’t be surprised!

If you haven’t done so already, get a copy of your credit report, which lists your financial history, including total debt and whether you pay bills on time. Checking your credit report regularly is the best way to spot identity theft, credit report errors or other financial missteps that very well could affect your ability to buy a home. You’re entitled to one free credit report from each of the three credit-reporting bureaus every year. Find out how to obtain your free reports at

So what documents does a loan officer need to pre-approve me?         

  •          W-2’s and tax returns for the past 2 years 
  •          Most recent pay stubs for the past 30 days
  •          Last two months’ of bank statements (all pages even if they are blank) 
  •          ID cards (I.e. Driver’s license, Social Security Card)

Be smart, take steps to secure your finances, and get pre-approved for a home loan. Soon you’ll be in the home you’ve always dreamed about!

Ready to apply for a loan? Click Here: