Pre-Qualification vs Pre-Approval…What is the difference and when is it needed?

First things first:

Sellers are advised not to accept a Buyers offer unless they have a minimum of a Pre Qualification letter included with their offer.  The Sellers Realtor may even call your lender to find out how much information you have provided the lender and if you are a strong or weak candidate for the loan stated on your offer.    Some Sellers will require the Buyer to do a back up Pre-Qualification from a local lender, although you may use your lender of choice.  

In a competitive market you want your offer to be stronger then other Buyers.  Sellers prefer the Buyer that is PreApproved.

Pre-Qualified and Pre-Approval are different degrees or levels of loan approval that can have a big impact on your offer being accepted.  Prequalified is the lower level of approval which results in some offers not being accepted and high numbers of people getting denied a loan while in Escrow.   

A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a "pre-qual" from a Web site is just as easy. Enter some information, click "submit" and voilà. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.


*Talk with a Lender Prior to viewing homes and get Pre-Approved 

  • Know how much you can afford
  • Know what interest rate you qualify for
  • Know what your monthly payment will be, including insurance and taxes
  • Know what type of loan you qualify for
  • Know how much down payment and closing costs you will need
  • Know that you have a written commitment from Lender to provide you a loan
  • Know that you will have no surprises in obtaining a loan


               Here is more information on the difference betwee Prequalification and Preapproval.


  • Simply an estimate of how much house you can afford.
  • The best time to get a pre-qualification is right at the beginning of your home buying process, before you even start looking at houses.
  • This involves talking with a lender and providing information on your income, assets, debts, and a potential down payment amount.
  • The lender would then provide you with an amount in writing of how much he thinks you could afford to pay for a monthly mortgage.
  • There is no cost involved and there is no commitment on either side.
  • This estimate is just helpful for you to figure out if buying a home is a viable option and what your price range would probably be.


  • Getting pre-approved means that you have a tentative commitment from a specific lender for mortgage funding.
  • You provide a lender with actual documentation of your income, assets, and debts.
  • This process may require an application fee, since the bank will run a credit check and work to verify all your employment and financial information.
  • Once you are approved, the lender will give you a letter of commitment, stating how much money the bank is willing to loan you for a home purchase.
  • With a pre-approval in hand you can start your shopping - real estate agents and sellers will take you much more seriously when they see you have your mortgage funding in place.
  • It is important to understand that even a pre-approval is not a guarantee that you will be approved for a mortgage loan. 
  • The funding will only be given when the property appraisal, title search, and other verifications check out on the home you have chosen to buy. 
  • The pre-approval is not binding; you can still obtain a mortgage from a different lender.
  • If you do stick with the same company that pre-approved you, the application process will be much shorter once you find the right house.