Mortgage Pre-Qualification vs Pre-Approval

Buying a house is one of the biggest milestones in a person’s life. As such, there are a lot of steps to follow in the home-buying process. One of the first steps is to secure a loan from a mortgage lender. This involves two steps: pre-qualifications and pre-approvals. This article will break down the differences between the two, and the steps to follow to get them and start shopping for a home!

What is a pre-qualification?

A pre-qualification is the first step in the home-buying process. It serves as a rough estimate by your lender of how much you can afford to spend on a house. A pre-qualification is a great tool for your personal budget review. This can be done in a few minutes with your lender. All you need to bring is a list of debts, assets, and income. With this information, your lender will determine if you qualify to take out a loan based on your debt-to-income ratio.

Two important takeaway points:

  • Getting pre-qualified does not mean you are ready to buy a house. This step serves as an estimate of how much you could potentially borrow from the bank
  • This step is not required to get pre-approved for a loan from your lender. However, lenders often grant higher loan amounts to those who are pre-qualified first.

What is pre-approval?

Pre-approval is determining how much money you can actually borrow from the bank. Unlike pre-qualification, pre-approval takes a deep dive into your finances and financial history to assess your risk of defaulting on your loan. It is only after you get pre-approved that you can start shopping for a house. After all, why go shopping for something if you don’t know how much you can spend? Don’t shop for a Mercedes if you can only afford a Honda. In addition, sellers are much more likely to accept offers from buyers who are pre-approved for a loan because it proves that their offer is more genuine and the transaction process will be smoother.

What do I need to get pre-approval?

You must bring proof of income and employment. This includes:

  • Pay stubs from the last 30-60 days
  • W-2 forms from the last 2 years
  • Federal tax returns
  • If you are retired, include a benefit reward letter and the last 2 years of 1099 forms and tax returns

You must also provide proof of assets, which includes:

  • Bank statements of all accounts with the name of the institution and account numbers. This includes checking, savings, Roth IRA, 401(k), and stocks.
  • If you are receiving help with paying for a house, include a gift letter with the signature of the gifter and the date of the gift.

Bring proof of identification:

  • State-issued ID
  • Social Security card

Don’t worry about printing out or bringing your credit score. The lender will run a credit check for you. Be sure to check your credit score before your appointment to make sure of the number. If you want or need to raise your credit score, take steps to improve it before scheduling an appointment with a lender.

Do pre-approvals expire?

Yes. They typically expire after 60-90 days, but check with your lender for specific details. They automatically expire if there is a severe impact on your financial situation. This includes anything that will negatively affect your ability to pay the pre-approved loan amount:

  • Lost job
  • Financial hazards such as identity theft or fraud
  • New substantial debt

Are you ready to start your home-buying journey? Contact your lender to start the pre-approval process. They will walk you through every step of the pre-qualification, pre-approval, and approval process with impeccable knowledge and communication. If you are unsure where to go for a lender, ask your real estate agent. They can point you in the right direction.


Already pre-approved? Congratulations! Click here to start your home-buying journey in Boise and the Treasure Valley.


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