Pre-Approval vs. Pre-Qualification: What’s the Difference?
One thing I always tell buyers is this: if you’re thinking about buying a home, or are starting the process, get pre-approved (or at least pre-qualified) early on! Getting pre-approved or pre-qualified for a mortgage goes hand in hand with figuring out your financing options, and is so important to have done early on in the process so you have an accurate idea of where you are financially and what you can really afford when it comes to buying a home. But the two do have some differences, so you might be wondering, what’s the difference between pre-approval vs. pre-qualification?
Here’s a quick breakdown so you can have a better idea of what each means and entails for you!
What is Pre-Approval?
Getting a pre-approval for a mortgage is the more in-depth option between pre-approval and pre-qualification. In short, it’s a more thorough look into your income, assets, credit, any debt, rental history, and more. A lender will conduct a pre-approval and take all of these things into account to give you a specific idea of how much home you can actually afford. With a pre-approval, a lender will also verify your job with your employer.
Something to note is that getting pre-approved will result in a hard inquiry on your credit (which can lower your credit score by a few points), because a lender will pull your credit reports during the pre-approval process.
Essentially, a pre-approval for a mortgage:
requires more paperwork
is a more in-depth look into your financial situation
is a hard inquiry on your credit
goes into detail on how much home you can afford
may help sellers understand that you’re serious about buying
How to Get Pre-Approved
Getting pre-approved for a mortgage requires quite a bit more information than getting pre-qualified. Here’s a few things your lender will typically ask for to give you a pre-approval:
recent paystubs
W-2s from the last two years
federal tax returns from the last two years (including freelance or business tax returns if applicable)
recent bank statements
copy of your driver’s license
social security card
What is Pre-Qualification?
A pre-qualification for a mortgage is basically a quicker, less in-depth version of a pre-approval. While a pre-approval is a concrete number for how much home you can afford, a pre-qualification is more of an estimate.
Getting pre-qualified is a quicker process than getting pre-approved. In general, you’ll only need some basic information (such as your name, contact information, and basic income and financial details). You can usually give this to a lender online or over the phone, and they’ll usually be able to give you a pre-qualification within just a few minutes.
Because this is just a general estimate of how much home you can afford, lenders won’t pull your credit reports to give you a pre-qualification, which means getting pre-qualified is not a hard inquiry on your credit. In this case, your credit score won’t be affected.
In short, a pre-qualification for a mortgage:
is more informal
can be done quickly online or over the phone
is not a hard inquiry on your credit
gives you a general idea of how much home you can afford
may not impact a home seller’s opinion strongly
How to Get Pre-Qualified
Like I said, getting a pre-qualification is a quicker process than getting pre-approved, because it’s less in-depth. What you’ll need to get pre-qualified is a lot less. In generally, you’ll usually only need:
your name
basic contact information
income estimate
amount of any debt(s)
Which is Better: Pre-Approval or Pre-Qualification?
Really, whether getting pre-approved or pre-qualified is better is tough to say, because it depends on your situation!
If you’re just wanting an idea of how much you could afford but might not be ready to start seriously looking at homes, I would suggest just getting pre-qualified. That way, you have an idea of how much you could afford and how much mortgage you could qualify for, but you’re also not getting a hard inquiry on your credit before you’re fully ready to buy a home.
If you’re starting out on your home search are are seriously ready to buy in the next few months (within 60 to 90 days - because pre-approvals do expire!), I would probably suggest going ahead and getting fully pre-approved. If you really are ready to buy a home, it’s helpful to start the process with a concrete idea of what you can afford. That way, you know exactly what your budget is and won’t waste time looking at homes you may not be able to realistically afford.
And something else to keep in mind: getting pre-approved before/when you start seriously house hunting can have a bigger impact on sellers than just having a pre-qualification. With the market the way it is right now, submitting offers on homes without a pre-approval is honestly pretty much a waste of time. But by going in with a pre-approval already in hand, sellers know that you’re serious and are ready to buy, which can be a big help in strengthening your offer.
Have more questions about the pre-approval vs. pre-qualification process? Feel free to contact me or send me a message on social media (my links are below)!
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