What's the difference between mortgage pre-approval and pre-qualification?
A mortgage pre-approval provides a fairly accurate estimate of a homebuyer’s purchasing power, as it includes the maximum loan amount and interest rate the borrower would qualify for. To provide a pre-approval, the lender will ask to see proof of income, employment, and debt. For this reason, it is more accurate than a pre-qualification.
If you are pre-approved, the lender will give you a pre-approval letter that states how much of a loan the borrower will likely qualify for, the interest rate, the length of the loan, the type of loan, and even the subject property address.
A mortgage pre-qualification provides an estimate of how much of a loan a homebuyer may qualify for. It doesn't require the borrower to submit proof of income debt or other financial information.
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Read on to learn more about mortgage pre-approval vs. pre-qualification.
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What is a mortgage pre-approval?
A pre-approval is a fairly accurate estimate of a loan amount and interest rate that a lender gives to homebuyers so they have an idea of how much of a mortgage they can afford.
To get a mortgage pre-approval, you, the borrower, must provide the mortgage lender with details about your finances. This information includes your income, assets, debt, and how much money you have for a down payment.
The lender will ask your permission to check your credit score. Once you have provided the necessary information, it will take a few days for the lender to confirm the information and issue you a pre-approval letter that states how much you are approved to borrow, the interest rate, and how long the approval is good for.
You may get pre-approved by more than one lender to see what interest rate, loan amount, and other terms you qualify for. A pre-approval is not a binding document between a borrower and a lender.
Once approved you will get a pre-approval letter. This is an important document for homebuyers to have. It shows home sellers and real estate agents that you, the buyer, have met with a lender and have been preliminarily approved for a mortgage. Home sellers are more inclined to negotiate with a pre-approved buyer and take his or her offer more seriously.
If you are not able to get pre-approved due to bad credit or a low credit score, you may need to follow these
tips for building your credit score.
Mortgage pre-approval requirements
These are the typical requirements all lenders will ask for to determine if a borrower can be pre-approved for a mortgage:
- Proof of identity. Usually a government-issued photo identification is required, such as a driver’s license or passport. You will likely be asked to provide your Social Security number as well.
- Proof of income. This includes paystubs, W-2s, (1099s, if you are self-employed), and tax returns.
- Proof of employment. Borrowers who are seasonal workers or sole proprietors may be required to show profit and loss statements, business tax information, and other documentation. Retirees will be asked to show pension or Social Security documents.
- Proof of assets. You will be asked to provide recent bank statements for checking and savings accounts, and some lenders will want to see your investment and retirement account statements.
- Proof of debt. This can include child support payments, other mortgage loans, and auto loans.
How long does a mortgage pre-approval take?
The length of time it takes to get a mortgage pre-approval and a pre-approval letter depends on several factors including how quickly you can supply the required information to the lender. The lender will take the time to verify the information you provided. On average,
it takes 7-10 days to get a pre-approval, although in some cases it may take less time.
What is a mortgage pre-qualification?
Getting a mortgage pre-qualification can be as simple as a conversation with a lender during which a homebuyer provides verbal information regarding their income, debt and assets, and the address or zip code of the property they are interested in.
The lender will do a “soft pull” of the individual’s credit score and use this information to determine if the individual can qualify for a mortgage. It is not a commitment from the lender and doesn’t guarantee that the individual will still qualify once a mortgage application is completed.
Mortgage pre-qualification requirements
Because a mortgage pre-qualification is simply a rough estimate of a loan amount you could potentially qualify for, the requirements are very simple and you won’t need to provide any documentation. You will need to provide the lender with your name, approximate income, and debt amounts, and give the lender permission to view your credit score. According to
myfico.com, most credit scores are not affected by multiple inquiries from auto, mortgage, or student loan inquiries made within a short period of time.
How long does a mortgage pre-qualification take?
Some lenders offer quick online pre-qualification that takes just a few minutes, which other lenders dig a little deeper and may provide pre-qualification in one to three days.
How are pre-approvals and pre-qualifications similar?
- No guarantee you'll get a mortgage. Both are just a cursory look at your ability to qualify. A mortgage application is still needed along with your financial information, all of which is thoroughly reviewed by the lender’s processing and underwriting departments. During this process, some people may not qualify after all.
- Both let you see how much you can afford. Homebuyers who want to get a good idea of how much house they can afford should take the time to get pre-qualified or pre-approved.
- No Requirement to use the lender who did the pre-approval/pre-qualification. The lender you choose isn’t set in stone until you fill out an official application and submit your financial documents.
How are pre-qualifications and pre-approvals different
- Estimate vs. specific loan amount. A pre-qualification provides an estimate, while a pre-approval provides a specific loan amount as well as an interest rate.
- Pre-approval requires extensive documentation. You’ll need to provide the lender with the required documents mentioned earlier.
- Pre-approval requires a credit check. Some lenders will provide a pre-qualification based on your estimated credit score and others will ask to do a “soft pull” that won't negatively affect your score. A pre-approval always requires a hard inquiry of credit from all three major credit bureaus.Mortgage pre-approval vs. pre-qualification: Which is better for buying a home?
If you’re serious about buying a house and ready to get started, then a pre-approval is the best option. Pre-approvals are far more valuable than a pre-qualification, as it shows sellers that you, the buyer, are serious about purchasing the home.
| Pre-Qualification |
Pre-Approval |
| Borrower’s financial information is stated; no documents required. |
Limited financial information must be provided. |
| Credit score may be a “soft pull” or not verified by the lender. |
Lender will do a “hard pull” of the borrower’s credit score. |
| Provides a rough estimate of qualifying loan amount. |
Provides a specific loan amount and interest rate. |
| Good for planning ahead and budgeting for a home purchase. |
Good for homebuyers who are ready to start house-hunting and making offers. |
Neither a pre-qualification nor pre-approval are binding loan agreements. After you have made an offer on a house, and your offer is accepted by the seller, you will need to complete a formal mortgage application with a lender and meet the lender’s qualifying criteria.
If after speaking to several lenders you are not able to get pre-qualified or pre-approved, you may need to
build or repair your credit score and
save money to buy a house.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
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