Pre-Qualified vs. Pre-Approved for a Mortgage: What’s the Main Difference?

Key takeaways

• A pre-qualification is an estimate of how much you might be able to borrow for a home, based on basic financial information you provide.
• A pre-approval is a conditional offer from a lender stating how much they’re likely to lend you for a home, pending final underwriting.
• A pre-qualification can help you understand your budget early on, while a pre-approval strengthens your offer once you’re ready to buy.

If you’re considering buying a home, you’ve likely heard that getting pre-qualified or pre-approved is an important early step in the mortgage process. While these terms are often used interchangeably, there are distinct differences between the two that every homebuyer should understand.

In this Redfin article, we’ll outline the differences between pre-qualification vs. pre-approval and which option is right for you. Whether you’re touring homes in Norfolk, VA, or looking at houses in Dallas, TX, here’s what you need to know about being pre-approved vs. pre-qualified.

What does pre-qualification mean?

A pre-qualification is an informal look at your finances, using information you provide to a lender and a soft credit pull. It gives you an estimate of how much you might be able to borrow and helps you gauge your overall financial picture. 

If you’re just starting to consider purchasing a home, getting pre-qualified gives you a good indication of your borrowing power. Since it’s a surface look at your financial situation, you have the opportunity to work on improving your finances before getting a pre-approval. 

You’re not required to be pre-qualified before applying for a pre-approval. However, if you want a general idea of what you may be able to afford, a pre-qualification can help you begin the homebuying process. 

What does pre-approval mean?

A mortgage pre-approval is an official statement from a lender showing how much you’re qualified to borrow. It also determines the type of loans you may be approved for, such as a conventional, FHA, or VA loan, the possible maximum amount you’re allowed to borrow, an estimated interest rate, though it’s not locked in 

Redfin real estate agent Joe Rath explains that a mortgage pre-approval “certifies what you’re able to afford.” It shows you’re a serious buyer and that your offer should be strongly considered. 

During the mortgage pre-approval process, a lender asks you to provide documentation such as W-2s, bank statements, tax returns, and proof of assets, among other things. The lender will run your credit report, which will result in a “hard inquiry,” meaning it can cause your credit score to decrease by a few points. This information allows the lender to more accurately assess your finances and what you’re pre-approved to borrow. 

A pre-approval letter takes into account your current financial situation. So as long as your finances continue to look the same, it’s likely you’ll be approved for the same amount when you officially apply for a mortgage later. Major changes in your finances between the time of your pre-approval and mortgage application can impact loan approval.

What’s the difference between pre-qualification vs pre-approval?

A pre-qualification gives you a general idea of what you can afford, while a pre-approval confirms it with verified financial information and a credit check. 

Below we’ll go over the key differences between the two:

When should you get pre-qualified?

A pre-qualification is good if you’re casually looking at homes, but not necessarily planning to make an offer soon. It gives you insight into how much you can afford to pay for a home and what mortgage you may qualify for, which can inform your house-hunting decisions. 

Your credit score won’t be affected by a pre-qualification if you decide you’re not ready to buy. If you find out you’re not pre-qualified for the budget or loan type you anticipated, it can give you a chance to work on improving your finances. 

When should you get pre-approved?

A pre-approval is good if you’re ready to buy a home soon or planning to make an offer on a property. Getting pre-approved can be especially important if you’re in a competitive market to help your offer stand out. In many cases, agents and sellers expect you to have a pre-approval. 

Pre-approvals have an expiration date, so it’s important to get one if you’re serious about buying a home in the near future. It also triggers a hard inquiry on your credit score, so only get a pre-approval when you need it. 

Is it better to get a pre-approval letter or pre-qualification?

A pre-approval is more significant than a pre-qualification, particularly if you’re making an offer on a house. Keep in mind that there are benefits to both. A pre-qualification can help you identify if you need to improve your finances and what you could afford. A pre-approval letter may be better if you’re already confident in your financial situation and plan to buy a home within the next few months. 

FAQs about pre-approval and pre-qualification 

How long does a mortgage pre-approval last?

Mortgage pre-approvals are typically good for 90 days. The pre-approval letter will show an expiration date, after which it’s no longer valid. Pre-approval letters “expire” because a borrower’s employment, assets, and debts can change. Lenders need up-to-date information before agreeing to another pre-approval. 

How long does a pre-qualification or pre-approval take?

A pre-qualification typically takes only a few minutes since it uses self-reported information to generate a quote. A pre-approval requires a lender to review additional documentation and verify your information. Therefore, it can take longer to complete, usually 1 to 3 business days, or in some cases up to a week. 

When is the best time to get pre-approved?

Ideally, you’d have your mortgage pre-approval letter before looking at homes. Having mortgage pre-approval shows a seller you’re a serious buyer and may make your offer stand out. 

Do I need to be pre-qualified before getting pre-approved?

No, you don’t have to be pre-qualified to get pre-approved. If you know you’re financially ready to buy, you can skip pre-qualification and apply for pre-approval.

Is a pre-qualification letter enough to make an offer?

Typically, a pre-qualification letter is not enough to make a strong offer. It relies on self-reported information, which doesn’t hold as much weight as a lender reviewing your financial documents, conducting a hard credit inquiry, and verifying personal information. 

Do you need a pre-approval to make an offer?

No, you don’t technically need a pre-approval to make an offer. However, including a pre-approval letter can strengthen your offer and demonstrate to the seller that you’re a serious buyer with a better chance of securing financing. In some areas, having a pre-approval may be a requirement so be sure to speak with your agent. 

Do I need to use the entire pre-approval amount?

No, you’re not required to buy a home that equals the entire pre-approval amount. For example, if you’re pre-approved to buy a house that costs $600,000, you can consider buying a home for any amount under that price.

Can your mortgage application still be denied with a pre-approval?

Yes, a lender can still deny your mortgage after pre-approval. It’s uncommon, but it can happen if you took out other lines of credit, left your job, or the home appraises for less than the purchase price.

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