Purchasing a home takes a lot of work and effort. One of the first steps to buying a home is getting approved for a mortgage, which includes pre-qualification and pre-approval. But what's the difference between these two terms?
Getting pre-qualified for a mortgage requires a potential homebuyer to provide a general overview of their finances to the lender, including income, assets, and debt. A credit check is not required at this point. The financial information is then reviewed by the lender and an estimate of the mortgage is given. This amount is subject to change upon pre-approval.
Pre-qualification can often be done online or over the phone at no cost. It takes up to 3 days to get a pre-qualification letter. This is a great time to speak with your lender about your specific mortgage needs and gain insights into the various options available. It also gives you an idea of the size of the mortgage that you are eligible for.
Getting pre-approved is the next step in the mortgage process. While pre-qualification indicates a homebuyer’s ability to obtain a mortgage, pre-approval gives a more definitive picture.
During this process, the homeowner completes an official application and provides the lender with all the necessary documentation for an extensive credit check. Once they have reviewed all the documentation, the lender will offer a mortgage pre-approval for up to a specific amount.
While pre-qualification and pre-approval are sometimes used interchangeably, they are different from each other, and both should be completed in the mortgage application process. If you have any questions, feel free to reach out.