What Is the Difference Between Pre-Qualification and Pre-Approval for Mortgages?

by Hank

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. A pre-qualification does not commit the bank to any obligation, but it helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-Approval Is BestPre-approval is a lender’s actual commitment to lend to you. It involves assembling the financial records such as pay stubs, W-2 IRS forms, bank statements, documentation for long term debts such as car loans, tax returns, and proof of any other income sources you list.  A pre-approval begins the formal mortgage approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

Pre-approval letters from lenders are the best way to go.  It will give you a definite advantage on negotiating buying a home and make the process a little faster.  You will not have to wait as long for the bank to approve the home of your dreams and possibly letting it slip away to another bidder.

A great resource to answer all of your home buying questions is the Department of Housing and Urban Development’s (HUD) 100 Questions and Answers About Buying a New Home.

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