TNG Explains: The difference between pre-qualified and pre-approved
Mortgage pre-qualification and pre-approval are distinct steps essential for informed homebuying.
Nov 23, 2023
Before you decide on a real estate agent or attend that first open house, there’s a rather important step you need to take first. That’s engaging the services of a mortgage broker or mortgage lender and getting pre-qualified.
Now, wait, you say. You’ve heard of a pre-approval, and this sounds similar, so is it just a different way of saying the same thing?
Not exactly. They’re different steps of the mortgage process that mean different things. And it’s very important when shopping for a home that you understand the difference between pre-qualified and pre-approved.
While not absolutely mandatory to do before you start shopping for a home, getting pre-qualified for a mortgage is a smart start for the savvy homebuyer. This first step in the homebuying process is usually quick and easy and can be done over the phone or online with most lenders.
To get pre-qualified, lenders generally require basic financial details, such as income, assets, and debts. It does not involve a full credit check and provides a baseline for you to start shopping for a home. Pre-qualification gives you a good idea of what you can afford, and you can find out your results within a few days, if not immediately.
Once you’re serious about buying a home, it’s time to get pre-approved. The pre-approval stage takes a deeper dive into your finances, gives you a clear idea of how much you can borrow, and confirms what interest rate you can expect to pay. With a pre-approval, the rate you receive will be guaranteed for a set amount of time (unless you plan to go with a variable rate mortgage) – usually 60 to 120 days – so it’s good to be in a position where you are ready to move before getting your mortgage pre-approved.
Pre-approval for a mortgage requires a full mortgage application, and you will need to provide a range of documents to confirm your financial situation, employment status, income, and expenses. Because of the extra work involved, mortgage pre-approvals can take upwards of two weeks to finalize. Note that some mortgage lenders will charge a fee for this.
This article is for informational purposes only and is not financial or legal advice nor a substitute for legal counsel.