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Pre-Qualify vs. Pre-Approve: What’s the Difference?

2022-02-10T10:33:14-06:00Home Ownership|

The home buying process typically includes getting pre-qualified and/or pre-approved for a mortgage. However, pre-qualification and pre-approval are not the same. And in a competitive market, knowing which to get could be the difference between landing your dream home and losing it to another buyer.

This blog breaks down the differences in mortgage pre-qualification and pre-approval so that you’re better prepared to make the winning offer.

(Psst, looking for info on getting pre-approved versus pre-qualified for a vehicle instead? We have a blog about that, too! Check it out here.)

What Does it Mean to be Pre-Qualified?

Being pre-qualified means a lender has decided you will likely be approved for a loan up to a certain amount, based on your current financial situation.

To get pre-qualified, you simply tell a lender your level of income, assets, and debt. The lender will then take that unverified information and determine the mortgage amount you will likely be approved for. There are no guarantees you will actually be approved for the same amount because the information hasn’t been independently verified.

Benefits of Pre-Qualification 

  • No effect on credit score
  • No fees
  • Helps you estimate what you can afford
  • Good for first-time homebuyers

While pre-qualification is often the first step of the mortgage process, some sellers won’t take you seriously until you’ve been pre-approved.

What Does it Mean to be Pre-Approved?

Being pre-approved means you’ve actually been approved by a lender for a specific loan amount. When pre-approved, you will receive a letter that states your approved loan amount.

Unlike getting pre-qualified, when getting pre-approved, you provide documented financial information (pay stubs, statements, obligations, credit report, etc.) to be reviewed and verified by the lender.

Benefits

  • No fees
  • Gives you negotiation power
  • Helps you know exactly what you can afford
  • Allows you to close faster

Something to keep in mind is that being pre-approved doesn’t guarantee you a loan. You still have to complete the application, go through the underwriting process, and wait for final approval. But being pre-approved indicates your financial ability and intent to purchase, so sellers look fondly upon buyers with pre-approval letters.

Which One Should I Get?

If you’re just starting the process of home buying, not sure just how much home you can afford, or if you’re not quite ready to buy yet, pre-qualification makes sense. Getting pre-qualified doesn’t affect your credit score, so it’s a good way to begin if you’re just browsing.

However, if you’re ready to buy within 90 days, pre-approval is what you want. When the housing market is hot, homes sell fast — sometimes within hours of being listed. If you already have financing, you can move fast — which gives you an immediate advantage over other buyers. There is a small credit hit (typically around five points), but if you’re serious about buying a house, you need to get pre-approved right away.

How to Get Started

At Connexus, the easiest way to get pre-qualified or pre-approved is to give our professional mortgage team a call at 800.845.5025. Our team is happy to help you navigate the entire mortgage process, from the application stage to closing day. Get in touch today!

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