Pre-Qualified or Pre-Approved: What’s the Difference?

In the past, realtors and people selling homes were looking out for buyers who were pre-approved. Pre-approved was a broad term that could mean anything from a potential buyer who applied for a loan to a buyer whose underwriting was done and they had been approved for a specific amount of money. Pre-Qualified and Pre-Approved were essentially interchangeable.

Now, due to regulatory changes, they mean completely different things. The two terms are defined as follows.

Mortgage pre-qualification means that a prospective buyer has applied for a mortgage, their credit has been pulled, and a decision is pending based on information provided by the buyer that has not been verified. The lender has notified the home buyer that ‘based on the information you have provided along with review of your credit report, and provided the information you have submitted is accurate, you can borrow up to a specified amount.’*

It’s very important when you look to be pre-qualified that you try not to “max-out.” Remember, besides your monthly mortgage payment, real estate taxes and home owners insurance, there are always additional home costs to consider, such as water, electric, heat, etc. So when requesting a loan amount, be sure you take your entire budget into consideration.

Mortgage pre-approval means that the majority of the underwriting process is completed before an offer is made on a property. You must provide all your income and asset documentation along with any other supporting documentation the lender requires. The loan is then pre-underwritten, and a decision is made.*

Statistically, most lenders provide pre-qualification letters upfront rather than pre-approvals. The primary reason is a pre-qualification letter can be issued within 24 to 48 hours, volume permitting, at no cost. A pre-approval letter can take much longer to process and may require a fee.

When you’re looking to buy a home, it’s a great idea to get pre-qualified. Then, when you find the right home, submit your documentation. 


We've published a guide specifically for first-time homebuyers. Download your free copy for a step-by-step explanation of the home-buying process. 

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*Definitions from the Consumer Financial Protection Bureau

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Joshua Rakiey

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