Mortgage Pre-Approval Vs. Pre-Qualification

by Hello Blue
January 30, 2020
Reading Time: 3 minutes

You hear these terms repeatedly when you are searching for a mortgage. It can be challenging to understand the meaning since these words are used interchangeably. One bank might give you a pre-qualification letter while the other gets you pre-approved. In this article, we’ll discuss the meaning from different perspectives. We’ll also give you the list of documents needed to get pre-approved. 

What is a Mortgage Pre-approval and Pre-qualification? 

Pre-approval or pre-qualification is the first step in the lending process. Both options give you an estimate of the amount; the lender will be willing to lend you. It’s not the lender’s commitment to issue the funds. The lender doesn’t have to give you the money, and you don’t have to work with that specific bank. 

However, it means that you have started searching for a suitable mortgage. You are contacting different banks, and you are getting estimates. In a competitive market, it is vital to be pre-approved because it shows you are serious about buying the house. Without pre-approval or pre-qualification, you can’t get a loan. 

What Does It Mean to be Pre-approved/Pre-qualified for a Mortgage? 

For pre-qualification, the lender runs your credit and gives you an estimate of the amount you can get. Pre-approval is an advanced process. The bank will review your tax returns and recent pay stubs and will then pre-approve you for the loan. 

However, different lenders have different processes. For example, Well Fargo pre-qualifies you without a credit check. They perform a credit check during pre-approval. They don’t check your documents for pre-approval or pre-qualification. 

In contrast to that, Bank of America, pre-qualifies after reviewing your credit. It’s best to ask individual lenders about their process, vision, and definition. 

According to the Consumer Financial Protection Bureau, there is no significant difference in meaning. However, there are legal distinctions. Both pre-qualification and pre-approval show the lender’s willingness. As long as the provided financial information is accurate and no red flags are raised, the bank will issue you the loan. After you find a house, they will establish their appraisal report. After further verification, the bank can approve the loan. However, banks are not obliged to work with you. Similarly, you can get pre-approved by many lenders. Check the rates you can get and then work with the bank that is giving you the best terms. 

Why Is It Important to Get Pre-approved? 

A pre-approval document is considered better than pre-qualification. Mostly, you get pre-approved after your lender has reviewed the complete documentation. 

Let’s say you are interested in purchasing a house. You submit an offer saying that you are a pre-qualified buyer. Someone else sends the offer, and they are pre-approved. Guess whose offer the seller will accept? 

  • A pre-approved buyer will get the priority because he is a step ahead in the mortgage approval process. 
  • Getting pre-approved has another advantage. You will know in advance how much you can get. 
  • It is best to start the process earlier. The lender will pull out your credit report. If there is an issue with the credit score, you can fix the problem ahead of time. 

What You’ll Need to Get Pre-approved? 

Generally, the bank will ask for these documents:

  • Pay stubs for the past three months
  • Tax returns of the past two years
  • W-2 forms of the last two years
  • Savings account/bank statement of the past three months
  • Other assets (stock, bonds, real estate) statements of the previous two months
  • Social security number, and authorization to get a credit report on your behalf


Pre-approval/pre-qualification is a document from the lender stating that you’ll probably qualify for financing. The financial institution will review your assets, debt obligations, and credit score to determine how much they would lend you. 

It is best to search for a mortgage product before you start searching for your dream house. You’ll know exactly how much will you get. A better approach is to get pre-approved by different lenders. That way, you’ll have a second option if one bank refuses to work with you. Don’t worry about multiple credit inquiries damaging your credit score. Within two weeks, all mortgage inquiries count as one credit pull, so that won’t drop your score. 

For information, please contact us. 

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