Mortgage Pre-Qualification vs Pre-Approval

Two often confused terms in the home buying process are a mortgage loan pre-qualification and a home loan pre-approval. Even some loan officers and real estate agents will use the terms incorrectly, so here's what you really need to know about each one.

A Prequalification Letter

Is typically the type of preapproval letter that a mortgage broker might issue, states the following types of documentation: The borrower has applied for a loan / Credit report has been checked / Based on information supplied, the borrower is qualified to buy a home at a predetermined maximum price.

Preapproval Letter

The borrower has completed a loan application / Credit scores are pulled and sufficient / Employment has been verified. Borrowers have submitted supporting documentation such as tax returns and bank statements. Borrower is preapproved to buy a home at a predetermined maximum price, pending an appraisal and title policy. You can see that a true preapproval letter carries a lot more weight. But it, too, is subject to final underwriting and is not a guarantee. It is subjective and dependent on more documentation and scrutiny.

We recommend that before you begin your house hunting, you begin the loan pre-approval process. Getting pre-approved requires that a lender verify your financial information, and it serves as their commitment to lend a specified amount based on that information. It will give you a number of advantages.


When you do find a property, sellers will take your offer more seriously given that you have a lender that has committed to backing your offer.


It does give the assurance that you're looking at homes you can confidently afford to finance. Your efforts will be focused on propeties that match your financing abilities.


You'll have an edge over the other buyers who aren't pre-approved in situations where there are multiple offers on a property. This can be the difference between having your offer accepted or losing the property to another buyer.