Mortgage Pre-Qualification vs. Mortgage Pre-Approval

preapproval vs prequal

Mortgage Q&A: “Pre-Qualification vs. Pre-Approval”

When you initially set out to purchase a new home, the real estate agent(s) and home seller will want to know you can actually afford the thing. Heck, you’ll want to know too.

After all, if you can’t afford to buy it, you’ll be wasting everyone’s time. Aside from affordability concerns, you may find other issues that disqualify you from obtaining a mortgage (do I qualify for a mortgage?).

Agents and home sellers will also want to know that you’re committed to buying a home, as opposed to those just casually browsing.

For these reasons, most real estate agents will demand that you get pre-approved before they even begin showing you prospective properties. Most agents have a mortgage contact they’ll likely refer to you to get the ball rolling.

Tip: You can use this contact for your pre-qualification and pre-approval needs, but don’t forget to shop around with other banks and brokers as well to ensure you obtain the lowest mortgage rate possible!

What Is a Mortgage Pre-Qualification?

If you choose to finance the home purchase with a mortgage, you’ll need to get pre-qualified first. A “pre-qualification” isn’t as robust as a pre-approval, but it’s a good first step to ensure you can purchase the home you desire (or any one at all).

A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.

[What credit score do I need to get a mortgage?]

You can get pre-qualified very quickly and easily with a bank or mortgage broker, but it won’t carry much weight in the eyes of the agent or the seller.

After all, with a pre-qualification you’re simply supplying estimates and your credit report probably hasn’t yet been run (though it should be pulled early on in the process). That said, a pre-qualification, or pre-qual, is just a determination of what you’d likely qualify for if you made an offer and applied for a home loan.

It’s not necessarily a waste of time, but it’s not going to get you very far.  You can liken it to running a few numbers to see where you stand, but it cannot be used in place of a pre-approval.

What Is a Mortgage Pre-Approval?

A pre-approval, on the other hand, actually has legs. It’s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question.

It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file.

Acquiring a pre-approval shows the interested parties (sellers, agents) that you’re a committed buyer, boosting your chances of sealing the deal at the price you want. It will also show you how much house you can afford, not just an estimate.

Mortgage Pre-Approval Requirements:

  • Credit report
  • Bank statements
  • Pay stubs
  • Tax returns

How Long Is a Mortgage Pre-Approval Good For?

Once you provide all the required documentation and get the mortgage pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that a lot of things can change during that time, such as your credit score, so it’s not 100% guaranteed.

Again, a pre-approval is not a guarantee that you will be approved for a mortgage. Otherwise it would just be an approval. And even an approval is still conditional on you meeting a series of requirements set forth by the lender.

If things do change dramatically, or even a little bit, it won’t matter if the pre-approval is just a few days old, as material changes can affect the outcome of your approval.

For example, if your credit score falls below a key threshold, like from 620 to 618, you could be denied after getting your pre-approval letter. It’s not the bank’s fault either, it’s just an unfortunate turn of events.

Same goes for anything the underwriter sniffs out during the approval process. They get a lot more involved and may find things that were initially missed.

When it comes down to it, an approval is never a sure thing until the mortgage is funded and closed!

As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.

Do You Need a Mortgage Pre-Approval Letter to Make an Offer?

At the end of the day, you don’t necessarily NEED a pre-approval letter to make an offer on a piece of property.  But nowadays, with so few properties on the market, and so many multiple-bid situations, it’s often a requirement just to hear back from the seller’s agent.

Sure, you can tell your real estate agent to tell the listing agent that you’ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,00 a year. And they might say fine, skip the pre-approval.

But chances are that’s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer.

And as I alluded to earlier in this post, it’s good to know where you stand as well.  You might think you’re a sure shot at getting a mortgage, but surprises aren’t all that uncommon and mortgage guidelines change all the time.

So a pre-approval could actually save you time and money, despite being a task that needs to be taken care of upfront.  It shouldn’t take very much work to get one anyway.

There are brokers and lenders that can get you one the same day, or even within a few hours, thanks to new technologies that are able to automatically verify things like your credit scores, employment, income, and assets.

Just remember not to feel obligated to use the bank that furnishes the pre-approval letter for you! It’s entirely possible to go elsewhere, and even use the letter to get a better offer from a different lender.

Next Step After Mortgage Pre-Approval

The next step after receiving a mortgage pre-approval is to either apply with the lender who provided it or apply for the loan elsewhere. You can certainly shop around and decide which company is the best fit.

Once you’ve selected a lender, you’ll need to sign disclosures and express your intent to proceed with the loan application. The lender will then begin collecting paperwork and signatures, including the purchase contract, in order to process the loan.

It will eventually land on an underwriter’s desk for full approval, at which point a list of conditions will be generated (if applicable) in order to fund the loan.

You will also be given an opportunity to lock your loan early on so the interest rate you are quoted won’t change.

To summarize, the difference between a pre-qualification letter and a pre-approval letter (for you lazy readers):

Mortgage Pre-Qualification:

  • First step
  • Less robust
  • Based on estimates
  • Doesn’t require a credit pull
  • Carries less weight/ not a sure thing
  • Not taken seriously

Mortgage Pre-Approval:

  • Based on verified information
  • Must complete an actual loan application
  • Requires a credit pull
  • Must be underwritten (manual or automated)
  • Written conditional commitment
  • Shows sellers/real estate agents you’re serious


78 Comments

  1. Rachael Powell October 27, 2017 at 4:49 pm - Reply

    I am currently working with a Loan Officer who works at a mortgage company. He has basically collected everything from me and has checked my credit score. He is only telling me what I qualify for, which is a monthly mortgage, and not how much of a loan I qualify for (I.E. a $200,000 house). He tells me it does not matter how much the home costs. When I asked him for a pre-approval letter, he tells me I cannot get one because I do not know what type of house I want when I have given him prices and addresses of various homes. Can’t he just use my personal information and apply it to each home price? Or can he just use my personal information and based on that, give me an estimate of how much of a loan I can afford? I am so new to this. Please help!

    • Colin Robertson October 28, 2017 at 8:13 am - Reply

      Rachael,

      You can ask him to add an “up to” purchase price to the pre-qual, with an associated down payment and loan type (such as conventional or FHA). It’s important to know what that $200k loan amount is based on, as you could be putting down $20k or $100k, and if that’s not specified, it’s not that clear how much you can really afford. And remember you can always shop around elsewhere to get more quotes and/or different service. Good luck!

      • Matt December 21, 2017 at 8:45 pm -

        I just wanted to say thank thank you Colin and Rachael for the string of questions and answers. I am working on getting pre approved and this has given me more knowledge so I can speak a little more intelligently when I talk to my mortgage broker.

  2. Lourdes Cotto July 24, 2017 at 12:27 pm - Reply

    Hi, you say the pre qualification is less robust, but I got a pre qualification certificate with detail the include the following: is this a pre qualification or pre approval i’m confused. I have removed the personal info for security purposes.

    The borrowers/buyers listed on this form have INQUIRED with our firm about financing to purchase a home and the information of income, down payment and credit report have been reviewed by the loan originator listed below. After careful review, it is the opinion of said loan originator that the borrowers/buyers should/would qualify for the terms listed below.
    Date: 07/05/2017
    Loan Originator’s Name:
    Borrower’s/Buyer’s Name:
    Loan Originator’s NMLS ID:
    Subject Address: TBD, To be determined, FL 34606
    Loan Originator State License #:
    Purchase Price Amount: $165,000.00
    Loan Originator Phone:
    Loan Amount: $162,011.00
    Total Monthly Payment not to exceed $1,308.92
    Loan Type: FHA
    Loan Originator Address:

    • Colin Robertson July 27, 2017 at 11:03 am - Reply

      Lourdes,

      The names are often used interchangeably so it’s always tough to tell what you’ve got, but actual pre-approvals should be a lot more involved than simple pre-quals.

  3. Natasha June 16, 2017 at 8:32 pm - Reply

    Hi, my family and I found a house recently for $248k. But we only got pre approved for $175k. That house has been on the market for 172 days. The seller’s willing to negotiate but we don’t know by how much and we don’t want to insult him by offering the price too low.. What should we do?

    • Colin Robertson June 19, 2017 at 9:40 pm - Reply

      Natasha,

      Someone once said if your offer isn’t insulting, you offered too much. That being said, $175k vs. $248k is quite a gap, so I don’t know if the sellers would be able to go down that low. May also want to explore your financing options if you really want the house to see if it’s possible to get a larger loan and/or a gift to cover more down payment. Good luck!

  4. Alan June 2, 2017 at 6:50 pm - Reply

    Colin,

    Useful Q and A’s. RE: Pre-qualification letter in AZ for FHA loan with good DTI and LTV. Over a week since we have: 1. Provided financials etc. 2. Heard anything from Broker. Yesterday he sent a text saying that he was returning from vacation. Still nothing today. We did receive our credit scores in the mail, though they reflect some dated negative information. We have a house in our sights and with our ~114K range, time is very much of the essence. I think that we need: 1. Lender process info. 2. Credit report fix. 3. New broker. A bit overwhelmed at this point..help! Thank you!

    • Colin Robertson June 5, 2017 at 9:37 am - Reply

      Alan,

      It sounds like the broker isn’t too motivated because you’re still home shopping. They seem to get more excited once you actually make an offer. But as you said, getting your financials all in order first is very important in today’s housing market so you can make your move ASAP once you find the right house. It appears as if you know what you’re doing…cleaning up credit can certainly help with qualifying and potentially obtaining a lower rate. Good luck!

  5. Carmen May 19, 2017 at 10:08 am - Reply

    Hi Colin. My husband and I are getting ready to purchase our first home. We have zero debt (except the monthly credit card that we pay off in full every month), I’ve been with the same employer for over 9 years, my husband going on 4 years, and we have excellent credit. We have about $75K saved up, and additional assets in stocks, bonds, and retirement accounts. We applied for a pre-qual back in March, and it will expire June 18th. The problem is, we are having a difficult time finding homes in our price range in the neighborhood we desire (we need to be near a school with a special program for our son), and time is running out. We are not super-picky, but would prefer not to pay down all our cash on a “fixer”, because it’s such a seller’s market right now. We’ve conceded that we may have to wait until later in the year, but are concerned that the “hard credit inquiry” will negatively effect our mortgage rate. Any advice? Thanks.

    • Colin Robertson May 20, 2017 at 7:10 am - Reply

      Carmen,

      Inquiries generally only move credit scores 5-10 points, and sometimes not at all. Other factors (revolving monthly debt, even if paid off by due date) may move your scores in the meantime since your scores don’t live in a vacuum. Ultimately, it shouldn’t be an issue unless for some reason your scores were on the cusp of a certain threshold, and happen to fall into that lower bucket.

  6. Liz April 2, 2017 at 1:45 pm - Reply

    Colin,
    Do you recommend setting up an initial consultation with a lender to go over finances and what we can/should do before seeking pre-approval? I have friends that went this route and were given tasks to compete financially to put them in a good position to apply for home loan. But, my brother did not go this route – he and his wife simply started the process and jumped in feet first.

    Do you recommend one path or another?

    • Colin Robertson April 3, 2017 at 5:58 pm - Reply

      Liz,

      I suppose you can do either but the pros of getting the pre-qual/pre-approval first are that you know how much you can qualify for (and thus can shop accordingly) and any red flags/surprises can be dealt with in advance. If you go in feet first, sellers may not take you seriously if you don’t have a pre-approval at the ready, and you may not give yourself enough time to fix any unforeseen mistakes.

  7. Brittany Tittle March 4, 2017 at 11:34 pm - Reply

    My husband and I want to buy a house.
    All the houses that we are looking at are from 170,000 – 190,000.
    My question is what amount should we ask for when we do the “pre-approval”?
    We got “pre-qualified” for 180,000, but I’m afraid to ask for too much and it will get declined.
    Is there a way to see the max we could get? Or will it just tell us the most they will lend us when we apply?
    I hope this makes sense.
    Thank you!

    • Colin Robertson March 5, 2017 at 9:49 am - Reply

      Brittany,

      It’s possible to get a maximum loan amount if you’re just shopping around to ensure you only look at suitable properties in your price range, but the agent/lender/broker may tell you to keep this to yourself so you don’t show your hand to a seller. After all, if they know you can afford more, your lowball offer may go nowhere.

      Once you get serious about a specific property, you can revisit the pre-qual/pre-approval and modify it for a specific loan amount based on a certain property’s purchase price including what you intend to offer.

  8. Sarah January 25, 2017 at 6:11 am - Reply

    My lender is asking us to send a letter to widthdrawl from my preapproval? We have one late payment from September we missed it by one day for the 30 day mark. Will this hurt my chances applying another mortgage preapproval another bank? I understand the late payment affect. We found a bank That will work with us we don’t want any negative impact.

    • Colin Robertson January 25, 2017 at 9:03 am - Reply

      Sarah,

      I doubt it, especially if other lenders already said they’d work with you. May want to get their pre-approval in order first.

  9. julie January 24, 2017 at 1:59 am - Reply

    Hi Colin,

    I got a pre-qualification letter from my lending bank. Your article here says that they don’t run your credit for a pre-qual, but they did with mine (I can see the credit run on my history, and they made me sign something saying I consented to having my credit run). I then received my pre-qual letter in the mail.

    I got a signed and executed contract from both myself and the seller of the house I offered, after I made an offer on it. It’s now in attorney approval. However their real estate agent has informed mine that they plan on using the attorney appeal to get out of the contract (by having their attorney reject it) so they can accept another offer, since they said they don’t like my mortgage. They said something like they don’t think I can get the mortgage, even though I had the pre-qual letter where my credit was run and tax docs checked.

    I don’t know what’s going on, or what any of this is, because it doesn’t seem normal. I thought I did everything right. Were they expecting me to get something else from my bank and now they want to cancel the contract? I had my credit run and had to bring my tax documents to the bank to get my letter.

    I’m really angry and confused. I thought my bank gave me everything I needed. They told me in the letter I received I needed a signed and executed contract to take it a step further, but the sellers won’t even let me do that, now that they are trying to get out of the contract.

    • Colin Robertson January 24, 2017 at 10:19 pm - Reply

      Julie,

      It sounds like you got a pre-approval if they ran credit and collected financial documents. Not sure why the sellers no longer want to proceed with your offer. You may want to consult with your realtor/lawyer to look over the contract you signed to determine your options.

  10. stephany January 3, 2017 at 10:32 am - Reply

    me and my husband are thinking of buying a house. We are self employed and we did not pay ourselves enough on paper, but our company grossed $450,000 this year and $295,000 last year is there any loan we can get with no verifiable income? I can supply tax returns and bank account info. also our credit scores are 640 and 630

    • Colin Robertson January 3, 2017 at 4:16 pm - Reply

      Stephany,

      There are non-QM loans, which specialize in flexible income documentation. But you may want to get a few opinions from a mortgage broker to see if they can make your income work with a bank/lender they do business with. Or if you can file taxes for 2016 ASAP and increase your salary?

  11. Rose December 28, 2016 at 4:13 pm - Reply

    I’m thinking of buying a fixer-upper home in a vacation area. I have a strong credit score and I work very steady freelance – I do fairly well but with fluctuating amounts. My work history (except for 20 years ago) is only 2 years old, after a divorce, but I have a decent income, and successfully went through a recent credit check for my $$$ rental home. Two questions: 1. Can a freelancer get pre-approved? 2. Can a freelancer get approved for a mortgage for a second home or a rental property purchase when I’m paying rent?

    • Colin Robertson January 3, 2017 at 9:38 am - Reply

      Rose,

      Best way to know for sure is to speak with a broker/bank, etc. As long as your freelance work is steady and proven over a couple years it should be doable, but only a bank can tell you for certain.

  12. Sam December 5, 2016 at 6:14 pm - Reply

    I’m a 1st timer! Getting ready to start the pre qualifying process.
    I live in NC.
    I make $1,500 a month minimum. I’ve had one job for over 2 year and started another 6 months ago.
    My credit score is 670
    Do you think I can qualify for a mortgage home for around $130,000 to $160,000 ?
    Start the process and thinking of a beautiful home that could be mine made me extremely excited, but after reading things on the Internet, it has definitely discourage me about my chances. Any feedback back would help. Thank you

    • Colin Robertson December 6, 2016 at 12:11 pm - Reply

      Sam,

      It depends on the monthly housing payment versus your monthly liabilities (car payment, credit card minimum payments, etc.). The fewer liabilities you have, the further your income will go toward a housing payment. Check out my page on DTI for more info.

  13. stephanie December 5, 2016 at 2:27 pm - Reply

    my question is me and my husband are looking to buy a house his credit score is 725 and mines is 630 my husband is the only one working making 700 a week we have a 15k for a down payment would we be okay to apply for a loan what are our chances to get approve??

    • Colin Robertson December 6, 2016 at 1:33 pm - Reply

      Stephanie,

      Probably a better chance if only he applied because your low credit score would make it harder to qualify and likely result in a higher mortgage rate. Only way to know for sure is to speak to a bank or broker or two.

  14. Richard November 21, 2016 at 10:03 am - Reply

    Sir,

    You stated ( You can check your own credit (without the inquiry/ding) and provide your scores to a potential lender to get a good idea of what you can afford/qualify for without the lender actually running your credit themselves.)
    I have had three lenders tell me that the scores i provided them mean absolutely nothing because they are from free sites like credit karma.
    Where can i check and see the scores that the lenders see without having to pay?
    Lenders check different sites so how do i know they see what i see?
    Thank you,

    • Colin Robertson November 21, 2016 at 12:19 pm - Reply

      Richard,

      They just mean the scores can’t be used for a proper pre-approval, but like I said, you can get an idea of where you stand and have them provide pricing assuming the scores you get for free closely match the scores they pull. You can’t get the scores they pull unless you have them pull them for you as part of a pre-approval or application.

  15. Lori October 18, 2016 at 11:44 am - Reply

    Hi Colin, I used finger hut store credit line and a small personal loan to build my credit up when paid them both off not missing one payment, then I applied for the finger hut revolving credit card, which they offered me. and my credit went from my 643 to 558, it came down 85 points. Also I am self employed cleaner. No bank account. The property we are looking to purchase is where we are living and renting now. Its a single wide mobile home (loan hard to get on single wide I heard) for $80,000.00 on close to 5 acres in NC. What are my chances of getting a mortgage? My brother in law, said he is willing to purchase with me, his credit is 550 with steady income and bank account would that help? Thanking you in advance for taking the time to read this.

    • Colin Robertson October 19, 2016 at 8:00 am - Reply

      Lori,

      While his income may help, his credit score of 550 will likely complicate matters. You’ll have to shop around to see who offers what. However, improving your credit score (and anyone else’s who is on the loan) before you apply might make life a lot easier.

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