Pre-qualifications and pre-approvals are how mortgage lenders determine whether your mortgage will be approved and how much mortgage you can afford.
The terms pre-qualification and pre-approval are not interchangeable.
A pre-qualification is a mortgage approval based on self-reported information. It does not verify a buyer’s credit score, income or money in the bank. This is only an estimate.
Pre-approval is mortgage approval based on verified data. It uses credit report, job data and bank information to confirm how and for how much money your loan is approved.
Needless to say, pre-approvals are for serious home buyers. Prequalification is for pretenders. This is the reason why many home buyers get pre-approved before they even start searching for homes.
Pre-approvals signal to sellers that you are an approved, motivated buyer who can afford to buy your home. Pre-qualification sends negative signals and should be avoided.
This table breaks down pre-qualification vs pre-approval.
| prior approval | pre qualification | |
| home buyer verifies income | Yes | No |
| home buyer verifies employment | Yes | No |
| verifies home buyer credit score | Yes | No |
| accepted by home sellers | Yes | No |
| accuracy level | 100% | 0% |
What is a mortgage pre-qualification?
A mortgage pre-qualification is an estimate of your ability to borrow money. This is a shortcut for lenders and buyers to assess whether your mortgage will be approved.
There are five questions to pre-qualify a first-time home buyer:
- Where do you live now and what is your rent?
- What is your annual household income?
- What is your credit rating?
- Have you recently had bankruptcy?
- Are you planning to make a downpayment?
Home buyers can answer the pre-qualification questions with a true, false or intermediate version. The lender will not verify the information provided or ask for proof.
Pre-qualifications are unverified estimates of an individual’s home buying power.
The advantage of getting pre-qualified to buy a home is that it’s quick. The disadvantage is that pre-approval sets wrong, unhelpful and bad expectations – especially for first-time home buyers.
Pre-qualification is appropriate when buying a home with bad credit or another job or credit discrepancy. Pre-approval is better than getting people approved.
What is a mortgage pre-approval?
A mortgage pre-approval verifies that a buyer can purchase and finance a home.
Pre-approvals are reliable. They consider the buyer’s creditworthiness, income and assets; And use that information to conditionally approve the mortgage.
Six verifications comprise a mortgage pre-approval:
- Verification of name, address and phone number
- Credit score and credit history verification
- Verification of income and employment history
- Verification of assets and savings
- Verification of Citizenship and Eligibility
- Verification of loans and balance loan payment
In addition, for VA loans, lenders will verify VA benefits eligibility and, for USDA mortgages, they will verify USDA asset eligibility.
Mortgage pre-approvals use hard credit inquiries and when digital data is unavailable, lenders verify with W-2s, paystubs, tax returns and personal bank statements.
Pre-approvals are the dress rehearsal for final mortgage approval.
When your mortgage is pre-approved, you know exactly how much home you can afford and what mortgage rates you can expect to qualify for. You’ll also get a verified estimate of your mortgage closing costs and an estimate of your monthly payments.
Finally, pre-approved home buyers receive a pre-approval letter, sometimes called a verified acceptance letter. A verified acceptance letter tells home sellers that you, as the buyer, can purchase and finance their home.
Home sellers don’t accept offers without a verified acceptance letter.
Get pre-approved to receive a letter now.
What is the difference: pre-approval vs pre-qualification
The difference between pre-approval and pre-qualification is that a mortgage pre-approval is verified and credible. In contrast, a mortgage pre-qualification is fantasy.
Pre-qualifications depend on self-reported information. Pre-approvals use official, recognized data.
Here’s a side-by-side comparison:
| prior approval | pre qualification |
| Verifies home buyer’s income using government mortgage standards, including depreciation add-backs and government benefit multipliers | Uses home buyer’s estimates of their annual income |
| Verifies home buyer’s assets and savings using government mortgage standards | Uses home buyer’s projections of assets and savings |
| Performs a credit review to find revolving and long-term loans | Uses estimates of home buyers’ monthly bills and obligations |
| Verifies two years’ history of housing payments to calculate payment shocks and other discrepancies | Doesn’t count for payment shocks and other mortgage disqualifications |
Pre-approvals do four things that pre-qualification does not:
- Pre-approvals confirm that the buyer can get financing for the home
- Pre-approvals set a buyer’s maximum purchase price
- Pre-approvals keep buyers within their budget
- The pre-approval strengthens the buyer’s offer for the seller.
Pre-approvals are the dress rehearsal for a buyer’s final mortgage approval. A pre-approved buyer can move forward toward their American Dream with confidence.
Pre-qualifying doesn’t add anything. They are a false vote of confidence.
GET THE REAL DEAL. Get pre-approved now.
What do you need to be pre-approved?
Getting pre-approved for a mortgage is easy. Homebuyer.com gives you an online pre-approval in just three minutes in our automated mortgage pre-approval center.
To be pre-approved with Homebuyer.com, most buyers will not need documentation. Income and asset verification is done digitally, saving you time and money, and credit checks are done instantly and free of charge.
Other mortgage lenders also offer mortgage pre-approvals.
As with other mortgage lenders, home buyers should expect to provide supporting financial documents, including W-2s, paystubs, bank statements and federal tax returns, for all buyers whose credit will be used for the loan.
Home buyers using a co-signer to buy their first home will need additional documentation to get pre-approved. Your lender can assist with questions.
Different mortgage companies will ask for different pre-approval documents; Some requests may seem difficult. Remember: A lender will only ask for their minimum required documents, so respond to requests promptly.
Which should I choose: Pre-qualification or Pre-approval?
In every scenario, getting pre-approved is better than getting pre-qualified for current and future home buyers. Pre-approvals are accurate and valuable. There is no prior qualification.
Pre-approval is the beginning of every successful home purchase.
Pre-approved buyers stay within budget, shop with confidence, and receive verified acceptance letters so sellers know they’re serious.
Pre-qualified buyers do not get any of these benefits.
Get started on your mortgage approval today with a proper pre-approval. Access the Homebuyer.com Mortgage Approval Center and get on your way to homeownership.
Click here to get pre-approved.
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Mortgage Pre-Approval FAQs
How long does it take to get pre-approved?
Using the Homebuyer.com Mortgage Approval Center, mortgage pre-approvals can be issued online in just three minutes. Manual pre-approval issued by retail banks may take several hours or even days.
Why does everyone keep saying I need a mortgage pre-approval? I just want to shop for houses.
Mortgage pre-approvals create a framework for buying your first home. A proper pre-approval tells you in what price range you should buy and helps you fine-tune your home-buying budget. Pre-approvals show you how a lender views your finances to help you buy a better home.
Is a Verified Approval Letter a Real Mortgage Approval?
No, a verified sanction letter is a fake loan approval based on a fictitious home at a specified price. When a seller accepts your offer to purchase your home, your mortgage lender will substitute that home’s information in your application, which turns your pre-approval into an actual mortgage approval.
When should I get pre-approval to buy my first home?
The best time to get a mortgage pre-approval is at the beginning of your home buying journey or as soon as possible afterward. Get pre-approved early to improve your credit score, if needed, and to make other budget adjustments.
How long does pre-approval last?
Pre-approvals are good for 90 days. If your home search lasts longer than 90 days, your lender may refresh it early. Learn more about how getting pre-approved for a mortgage affects your credit score.
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