Updated: Sep 25
If you're thinking about buying a home, you've probably heard the terms pre-qualification and pre-approval. While they're often used interchangeably, they aren't quite the same thing.
Understanding the difference can help you know where you stand before you start shopping.
What Is a Pre-Qualification?
A pre-qualification is generally an early look at your financial situation. Based on the information you provide about your income, debts, down payment and other factors, a mortgage professional can give you an idea of what you may be able to afford.
It's useful for starting the conversation, but it isn't a guarantee that you'll be approved for a mortgage.
What Is a Pre-Approval?
A pre-approval typically involves a more detailed review of your finances and supporting documentation. Depending on the lender, your credit may also be reviewed.
A pre-approval can give you a better understanding of your potential borrowing range and may allow you to secure a rate for a specific period, depending on the lender and product.
However, even a pre-approval isn't a final mortgage approval. The property itself and your financial circumstances still need to meet the lender's requirements once you make an offer.
Why Get Pre-Approved Before You Shop?
Knowing your approximate budget before you start looking at homes can save you a lot of time and prevent disappointment.
It can also help you move more confidently when you find a property you love because you've already started the financing conversation.
The earlier you speak with a mortgage professional, the more time you have to identify anything that could affect your application and address it before you're ready to buy.
Thinking about buying a home? Let's talk about your options and get you started on the right foot.
