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What is the difference between pre-approval vs. pre-qualification?

Updated: Jul 25, 2023

When it comes to buying a property, it's essential to understand the difference between pre-qualification and pre-approval for a mortgage. While these terms are sometimes used interchangeably, they carry distinct meanings and significance in the mortgage application process.

pre-approval vs. pre-qualification


Pre-qualification serves as the initial step, providing a rough estimate of the loan amount a borrower may qualify for. It involves supplying a bank or lender with an overview of your financial situation, including income, assets, and debts. This process can typically be completed quickly, either over the phone or online, without any cost. However, it does not involve a comprehensive assessment of your credit history or financial background.

While a pre-qualification letter can be beneficial during the offer stage of a home purchase, it does not carry the same weight as pre-approval. Sellers often ask potential buyers if they have undergone pre-qualification, as it demonstrates the buyer's seriousness and ability to perform on the contract.


Pre-approval is a more thorough and involved process that follows pre-qualification. It requires completing an official mortgage application and providing the necessary documentation for a comprehensive credit and financial background check. By undergoing pre-approval, borrowers receive a conditional commitment in writing for a specific loan amount. This step also offers a better understanding of the potential interest rate to be charged.

Pre-approval gives borrowers an advantage when dealing with sellers since they are one step closer to securing an actual mortgage. Some lenders may allow borrowers to lock in an interest rate or charge an application fee for pre-approval. However, it is crucial to note that pre-approval is still conditional and subject to the property's appraisal.

Key Differences:

Here is a summary of the key distinctions between pre-qualification and pre-approval:

  1. Mortgage Application: Pre-qualification does not require filling out a mortgage application, whereas pre-approval does.

  2. Application Fee: Pre-qualification generally does not involve an application fee, but pre-approval may have associated fees.

  3. Credit History Check: Pre-qualification does not involve a credit history check, but pre-approval does.

  4. Financial Review: Pre-qualification is based on a review of the information provided by the borrower, while pre-approval involves a more in-depth analysis of finances.

  5. Loan Amount Estimate: Pre-qualification provides an estimate of the loan amount, while pre-approval provides a specific loan amount.

  6. Interest Rate Information: Pre-qualification does not provide interest rate details, whereas pre-approval does.

Benefits & Considerations:

Completing both pre-qualification and pre-approval before searching for a home offers several advantages. It helps borrowers understand their affordability and prevents wasting time on properties beyond their budget. Additionally, pre-approval speeds up the buying process and demonstrates seriousness to sellers in competitive markets.

It is important to remember that being pre-approved for a certain amount does not mean you must spend that entire sum. Buyers can explore properties at or below the pre-approved amount, allowing flexibility in their decision-making process.


Differentiating between pre-qualification and pre-approval is crucial for homebuyers. While pre-qualification provides a preliminary estimate, pre-approval signifies a more definitive commitment from the lender. Understanding these terms and their implications will streamline the mortgage process and enhance your ability to make informed decisions during property purchase.

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