Pre-qualification vs. pre-approval

The short version

A pre-qualification is a quick estimate of what you might be able to borrow, based on information you report. A pre-approval is a deeper review in which the lender verifies your documents and checks your credit. Sellers generally take a pre-approval more seriously.

Pre-qualification

• Based on income, debts and assets you tell the lender about.
• Usually quick, and often does not require a hard credit pull.
• Useful for early budgeting. It is not a commitment to lend.

Pre-approval

• The lender reviews documents such as pay stubs, W-2s and bank statements.
• Typically involves a credit check.
• Results in a letter stating how much the lender may be willing to lend, subject to conditions such as an appraisal and final underwriting.

Even a pre-approval is not a final loan approval. Changes to your income, credit or debts, or problems with the property, can change the outcome.

When to get which

Get a pre-qualification when you are exploring what you can afford. Get a pre-approval before you start making offers, so you know your real budget and can show sellers you are serious.

How to prepare

Gather your recent pay stubs, two years of W-2s and tax returns, and two months of bank statements before you apply. Having them ready is the biggest factor in how quickly a pre-approval comes back.