Mortgage pre-qualification and pre-approval are used interchangeably, and most mortgage lenders have different definitions of these terms. But they are not the same.
There are critical distinctions between the two terms, and if misused, they can significantly impact your home buying preparations!
This blog will cover more details about mortgage pre-approval vs. pre-qualification and learn the differences between both terms.
What is pre-qualification?
A mortgage pre-qualification lets you know roughly how much money a mortgage lender is likely to loan you based on the basic financial information you provided.
Typically, you will be asked to provide this basic information:
- Existing loans
- Potential down payment
The process is usually quick, and the whole process is usually over in less than a day. Pre-qualification can be done in person, over the phone, or online. You can opt-out of this process as it does not carry much weight when presented to a seller.
What is pre-approval?
Pre-approval allows a mortgage lender to give you the exact amount of mortgage loan you can qualify for and at what interest rate.
Unlike pre-qualification, pre-approval involves a more detailed look at your financial data. Lenders will have a complete financial background check on you and may ask you to provide the following information:
- Income and Employment
- Proof of Identification
- Residential history
- Bank statements
- Tax information
- Credit report
- Assets and obligations
Depending on your lender’s procedure, a pre-approval letter takes a little longer to process – usually from a few days to several months. Not all lenders have the same pre-approval process, so you need to check with your mortgage lender to know their rules and requirements.
What’s the difference between pre-qualified vs. pre-approved?
According to The Ascent, a financial firm, the main difference between pre-qualification and pre-approval is that: Pre-approval is a commitment to lend. In contrast, pre-qualification is a quick and easy way to learn about mortgage possibilities when you plan to buy a home.
Another distinct difference between the two terms is that pre-approval requires a comprehensive examination of your financial documents like W-2s, pay stubs, and tax returns. In contrast, pre-qualification does not.
From a seller’s perspective, getting pre-approved for a mortgage loan means you’re ready to buy a house. It can also give you an advantage over other home buyers when making an offer on a house.
Getting pre-qualified and pre-approved will help you get ahead of the competition, especially in a competitive market.
Ready to get started?
We are the only mortgage company in Vancouver, WA, that offers an honest and accurate pre-approval mortgage process. We verify all income and assets to ensure your approval is authentic.
Make sure you’re working with a top-notch mortgage company that is familiar with your local area to help you in your house search!