• Home
  • Your Agents
    • Free Home Evaluation
  • FAQ
  • Properties
    • Our Marketing Plan
  • Market Reports
    • Baldwin
    • Ellsworth
    • Hudson
    • New Richmond
    • Prescott
    • River Falls
    • Roberts
    • Spring Valley
  • News & Insights
  • Contact Us
Menu
  • Home
  • Your Agents
    • Free Home Evaluation
  • FAQ
  • Properties
    • Our Marketing Plan
  • Market Reports
    • Baldwin
    • Ellsworth
    • Hudson
    • New Richmond
    • Prescott
    • River Falls
    • Roberts
    • Spring Valley
  • News & Insights
  • Contact Us

Cart

News & Insights

Home News & Insights Pre-qualified vs. pre-approved: What’s the difference?
What is the difference between being pre-approved and pre-qualified for a loan. white paper with red writing

Pre-qualified vs. pre-approved: What’s the difference?

26 June 2022
News & Insights
By: Betty Most Agency
Tag: approval, bank, Betty Most Agency, conditional loan, Conventional Home Mortgage Loan, fully underwritten, Home Loan, Loan, loan approval, loan documents, Mortgage, pre-approved, pre-qualified, real estate loan, underwriter, underwritten

What is the difference between pre-qualification and pre-approval? What type of mortgage loan should I apply for? How can I work with a lender to get the best interest rate?

As a first-time homebuyer, you may be overwhelmed by the home loan process – and by all the terms that you encounter as you work to secure mortgage approval.

By familiarizing yourself with industry lingo, and the ins and outs of getting a mortgage, you’ll gain confidence and can even stand out from the crowd of buyers who are competing over today’s limited inventory of homes.

First, let’s discuss the difference between two important terms: mortgage pre-qualification vs. pre-approval. These are the two most common preliminary steps in applying for a home mortgage loan, but they each have different requirements and unique benefits.

Pre-approval vs. pre-qualification at a glance

Getting pre-qualified and pre-approved for a mortgage are both important steps in the homebuying process. While pre-qualification and pre-approval may seem intimidating, they don’t have to be!

Main differences between getting pre-qualified and pre-approved

First of all, let’s be perfectly clear: pre-approval is not the same as pre-qualification. These two terms refer to separate processes when applying for a home mortgage loan.

A pre-qualification is a rough estimate of what you might be able to borrow for your mortgage. Pre-qualification is based on your “best guess” of information, which hasn’t been verified by the lender.

In contrast, mortgage pre-approval is the most comprehensive step a buyer can take toward attaining a home mortgage. To get pre-approved for a mortgage, the buyer will submit an official mortgage application and document their financial history for their lender. Once the lender verifies the information, they will offer a pre-approval letter to the buyer, stating that the buyer is “pre-approved” for a mortgage loan of a certain amount, with specific terms.

Key similarities between pre-qualification and pre-approval

Pre-qualification and pre-approval both help you determine your search parameters and the amount of money you will likely be able to borrow for a mortgage. However, sellers tend to take pre-approved buyers more seriously than pre-qualified buyers, because only pre-approved buyers have been truly vetted by a lender.

What is the difference between being pre-approved and pre-qualified for a loan. white paper with red writing

You Might Also Like: Ways to Go Green in the Kitchen

What does pre-qualified mean?

Pre-qualification can be the first step in the mortgage process. In a pre-qualification, buyers can provide their own financial information, and the lender returns a general evaluation of the loan amount that the buyer can likely secure. Most lenders provide pre-qualifications for free, and they can be completed in a short time over the phone or online.

The pre-qualification amount is mainly for the buyer’s personal reference. Because the buyer’s finances were self-reported and not evaluated directly by a lender, a pre-qualification shouldn’t be submitted to a home seller as evidence of a buyer’s creditworthiness.

You Might Also Like: Open House Tips for Buyers and Sellers

Primary benefits of being pre-qualified for a mortgage

The benefits of pre-qualification are for the buyers. A pre-qualification:

  • Can be the first step in the house-hunting process.
  • Can help establish a preliminary home buying budget.

What documents do I need to provide?

Pre-qualification typically requires only a handful of documents*, including:

  • Annual income and accrued debt
  • List of assets and bank account information
  • Desired mortgage amount
  • Intended down payment amount

*Additional information may be required.

What does pre-approval mean?

The second step towards obtaining a mortgage, pre-approval, is a much more involved and thorough process. Here, the buyer turns in an official mortgage application and provides the lender with an extensive financial history. In return, the lender provides a more specific intended loan amount as well as the estimated interest rate the buyer can expect (assuming rates hold).

In short, a home loan pre-approval can offer the borrower peace of mind as they determine their budget and buying power. And because sellers and their agents recognize the effort it takes to get pre-approved for a mortgage, they may take buyers with a pre-approval letter more seriously. In a multiple-offer scenario, sellers and their agents may not even consider an offer that doesn’t come with a pre-approval letter.

Advantages of pre-approval

The benefits of pre-approval can be for both the buyer and the seller. A pre-approval:

  • Can be the first step in the home purchase process.
  • Provides the buyer with an estimate of their likely budget and buying power.
  • May provide an estimated interest rate, should current rates hold.
  • Can help buyers stand out in a competitive market.
  • Demonstrates that a buyer is serious and ready to move quickly.

What documents do I need to provide?

Pre-approval requires official documents, including your:

  • Driver’s license
  • Social security number
  • Last two tax returns
  • W-2 statements for the last two years
  • Recent pay stubs
  • Clear records of any other income sources
  • Employer contact information
  • Proof of assets in savings or investment accounts

In addition to reviewing the above documents, your lender will dive deeper to review your full financial history and credit history. During the process, you’ll also submit a full mortgage loan application to your lender*.

*Additional information may be required.

Which is better for you?

If you’re planning to buy a home and trying to decide between getting pre-qualified or pre-approved, we recommend that you get pre-approved for a mortgage. It takes a bit more time, but getting pre-approved provides many more benefits once you begin the home buying process.

A pre-approved buyer can feel confident that (assuming their finances and employment don’t drastically change during their home search), they can search and bid for homes that are priced within their budget.

And while getting pre-approved doesn’t automatically mean your offer will be accepted, it does signal to the seller and their agent that you are a serious buyer who has taken comprehensive steps to get pre-approved for a specific loan amount.

Tips and considerations to help you decide:

The right choice ultimately depends on what the buyer needs. Here are some examples of when you may want to get pre-approved or pre-qualified:

  • Looking for a quick and general estimate on what you can spend on a home? Try getting pre-qualified.
  • Are you serious about purchasing your dream property on a quick timeline? Opt for pre-approval.
  • If your financial and personal documents are organized, get pre-approved.
  • If you expect to enter the traditional real estate market, which is extremely competitive, set yourself up for success with pre-approval.

Home loan FAQs

Here are answers to common questions homebuyers have about mortgages and the home loan process.

Q: What is conditional loan approval?

If a lender offers conditional loan approval, it means that they are confident that your loan will be approved – but they also want you to meet a few more criteria before the closing of your home purchase. In this case, your lender will provide a conditional approval letter, which lays out the expectations you need to meet in order for your loan to become fully approved.

Common conditions include:

  • Submitting additional paperwork to verify your credit or financial information.
  • Offering an explanation for large, recent withdrawals.
  • Providing a letter explaining the source of your mortgage gift funds.

Q: What does ‘fully underwritten pre-approval’ mean?

Fully underwritten pre-approval is the most secure type of pre-approval; it is essentially a guarantee from your lender that your loan will be approved once you make an offer on a house within your pre-approved budget.

If a buyer has underwritten pre-approval, it may help them appear more attractive to home sellers and able to close on a faster timeline.

Q: Do you need pre-approval to make an offer?

Technically, you can make an offer on a home without getting pre-approval. However, your offer is more likely to be seriously considered if you speak with a lender and gain pre-approval.

Remember, you will have to submit all your financial paperwork later on anyway, as your loan is approved. By getting pre-approved, you are removing some of your own risk; you will be less likely to find a dream house that slips away, or to make an offer on a house that is out of your budget.

Q: What is the difference between pre-approval and approval?

Pre-approval refers to the process of validating your financial documents and ability to work with a mortgage lender to obtain a home loan. Mortgage approval is the final step in the home loan process; it means that your lender has removed all conditions and has officially declared that your loan (and home purchase) can go through as planned. By getting pre-approved, the path to getting full mortgage approval could be quite a bit smoother and faster.

Q: What qualifications are required to acquire a home loan?

Home loan qualifications may differ depending on the type of loan a homebuyer is looking to acquire. The major loan types include:

  • FHA loans
  • VA loans
  • USDA loans
  • Conforming loans
  • Non-conforming (jumbo) loans

Mortgage loans also come in fixed-rate and adjustable-rate plans. Click here for more information on each loan type and the corresponding documents that are required.

Secure your mortgage and start shopping for your next home

Securing a home loan may seem complicated, but we’re here to help you every step of the way. Whether you’re pre-qualified, pre-approved, or still at the starting line, you’ll want to secure the representation of a REALTOR® you can trust. Begin your home buying process by reaching out to Edina Realty or your agent today.

Betty Most Agency

Leave a Reply Cancel reply

You must be logged in to post a comment.

← Ways to Go Green in the Kitchen A Simple Remodel Leads to Insanely Beautiful Garden →

Recent Posts

  • 7 Tips to Sell Your Home Fast in 2025
  • 5 Hidden Homebuying Costs & How to Prepare
  • Housing Market Insights for River Falls Buyers & Sellers
  • How to Create an Outdoor Space Buyers Will Love
  • How to Stage Your Home Like a Pro Without Breaking the Bank

Recent Comments

  1. Staging a House For Sale: A Seller’s Guide | Betty Most Real Estate | River Falls Real Estate Agent on 7 Ways to Find Your First Home
  2. Kitchen Cabinets: What to Consider | Betty Most Real Estate | River Falls Real Estate Agent on Hot Home Trend: The Disinfection Room
  3. How to Save on Utility Bills – Betty Most Real Estate | River Falls Real Estate Agent on The Impact of Low Inventory on the Fall Housing Market
  4. Using Social Media to Inspire Your Decor Choices – Betty Most Real Estate | River Falls Real Estate Agent on 6 Easy Ways To Organize Your Kitchen That’ll Make Cooking Less Stressful
  5. Using Social Media to Inspire Your Decor Choices – Betty Most Real Estate | River Falls Real Estate Agent on Should You Renovate Your Bathroom Before Selling?

Categories

  • Agents (6)
  • Blog (2)
  • Business Relationship Disclosure (1)
  • Buy (4)
  • DIY (9)
  • FAQ (2)
  • Featured (5)
  • Holiday (4)
  • Home and Garden (12)
  • Home Remodel (8)
  • Interior Design (13)
  • Kitchen Remodel (1)
  • Latest News (2)
  • News & Insights (96)
  • News & Insights|Properties|Property|Real Estate (1)
  • Pets (2)
  • Properties (5)
  • Property (14)
  • Real Estate (32)
  • Sell (4)
  • Your Agents (1)

Recent Comments

  • Staging a House For Sale: A Seller’s Guide | Betty Most Real Estate | River Falls Real Estate Agent on 7 Ways to Find Your First Home
  • Kitchen Cabinets: What to Consider | Betty Most Real Estate | River Falls Real Estate Agent on Hot Home Trend: The Disinfection Room
  • How to Save on Utility Bills – Betty Most Real Estate | River Falls Real Estate Agent on The Impact of Low Inventory on the Fall Housing Market
  • Using Social Media to Inspire Your Decor Choices – Betty Most Real Estate | River Falls Real Estate Agent on 6 Easy Ways To Organize Your Kitchen That’ll Make Cooking Less Stressful
  • Using Social Media to Inspire Your Decor Choices – Betty Most Real Estate | River Falls Real Estate Agent on Should You Renovate Your Bathroom Before Selling?

Archives

  • June 2025
  • May 2025
  • April 2025
  • March 2025
  • December 2024
  • October 2024
  • July 2023
  • June 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • March 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019

Categories

  • Agents
  • Blog
  • Business Relationship Disclosure
  • Buy
  • DIY
  • FAQ
  • Featured
  • Holiday
  • Home and Garden
  • Home Remodel
  • Interior Design
  • Kitchen Remodel
  • Latest News
  • News & Insights
  • News & Insights|Properties|Property|Real Estate
  • Pets
  • Properties
  • Property
  • Real Estate
  • Sell
  • Your Agents

Recent posts

  • luxury home with beautiful landscape - How to sell your home fast.
    Jun 12, 2025
    7 Tips to Sell Your Home Fast in 2025
  • Front porch with white pillars and blue exterior paint and red door.
    Jun 12, 2025
    5 Hidden Homebuying Costs & How to Prepare
  • white farmhouse set with a backdrop of trees and mountains.
    Jun 12, 2025
    Housing Market Insights for River Falls Buyers & Sellers
  • Beautiful home outdoor patio
    May 29, 2025
    How to Create an Outdoor Space Buyers Will Love
  • Home staging like a pro without breaking the bank
    May 29, 2025
    How to Stage Your Home Like a Pro Without Breaking the Bank

Our Location

Address: 129 South Main, River Falls, WI 54022

Phone: (715) 821-6491

E-mail: bettymost@edinarealty.com

  • Facebook
  • Instagram

Market Reports

  • Baldwin
  • Ellsworth
  • Hudson
  • New Richmond
  • Prescott
  • River Falls
  • Roberts
  • Spring Valley

Betty Most

Randy Baugher

Randy Baugher

Betty Most Agency

Betty Most Agency
Edina Realty Logo Black with white text
Copyright 2024 | Betty Most Agency, Inc. | Powered by Steel Blue Media | Design by Steel Blue Media,

Style Switcher

Background Color

Background Image

Preset Switcher

  • Preset 1
  • Preset 2
  • Preset 3
  • Preset 4