Pre-Qualification vs Pre-Approval – What’s the Difference?

Pre-Qualification vs Pre-Approval

There is a distinct difference between a Pre-Qualification vs Pre-Approval. Some buyers, lenders and even agents use the terms interchangeably but actually they are very different.

Becoming familiar with the differences between a pre-qualification vs pre-approval can play in your favor in a tough housing market. Let’s take a look at each option and how they are typically viewed by agents and sellers.

Remember, I am NOT a lender. This is simply an overview of the two processes and may differ from lender to lender, location to location. I am an Indiana Licensed REALTOR and am recommending you contact lenders for detailed information concerning mortgage loans. They are your best resource!

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Process of Pre-Qualification

When you see the ads online saying things like:

Get Pre-Approved for a Mortgage in just a few minutes!

these are actually (usually) a “Pre-Qualification.”

They are typically a set of questions you answer; things like:

  • What is your income?
  • How long have you been with your current employer?
  • Do you have and what are the balances of a vehicle loan? Credit cards? Student Loans? etc…
  • Do you own any other property homes?

Each lender can be a bit different in the questions they ask.

Once the questions are answered, and they do a soft or hard credit pull, they create a Pre-Qualification letter (sometimes calling it a pre-approval, but it’s really not.)

In reality, it is an “Estimate” of what you “MIGHT” be approved for as far as a mortgage loan is concerned.

Why is it an estimate? Because nothing has been verified. They are taking you at your word and you may not have given them all the information the need to actually Pre-Approve you for a mortgage loan.

Process of Pre-Approval

During the pre-approval process, they ask a lot of the same questions but go a step further to verify the information you are giving them.

They will ask for tax returns/W-2s and pay stubs to verify your employment history. Bank statements are needed to verify activity, loan payments and income. Additionally, they want to see your complete credit history and profile in addition to your credit scores to determine their risk in giving you a loan.

In other words, they go to the next level and when they issue you a true “Pre-Approval Letter”, they are much more confident in your being final approved for a mortgage once you have an accepted offer on a home and make formal application with them.


**Hard Credit Pull – Lenders do a hard credit pull when they are Pre-Approving you for a mortgage. It does affect your credit but most lenders agree it’s only by 3 to 5 points.

However, when you are shopping around for a mortgage (which you should), Credit Bureaus treat multiple Lender Credit Pulls as “One” pull when done within a 14 to 30 day time period!

Review of the Pre-Qualification vs Pre-Approval Process

In conclusion, the Pre-Qualification vs Pre-Approval processes are different with the Pre-Approval carrying more weight with sellers and their agents.

It takes a little bit longer since you have to find and submit some documents but it’s well worth it when you go to make an offer on your dream home.

My opinion? Skip the Pre-Qualification process and go straight for the Pre-Approval. It’s worth the time and effort when you are considering buying one of the biggest assets you’ll ever own!

Area Lenders

Fairway Mortgage

Kelly Burris

Caliber Home Loans

Bill Montgomery

GVC Mortgage

Rich Moore

Ruoff Mortgage

Chris Cannon

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