Home Loan Terms: Pre-qualified vs. Pre-approved

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When you start shopping around for a home loan, you are likely to run into terms like “pre-qualified” and “pre-approved” to describe whether or not you are eligible for a certain mortgage amount. Before you start your house-hunting, it’s a good idea to know the difference between these two terms, and what to expect from them.


When you first shopping around for a mortgage, you will be pre-qualified for a certain amount. This is an unofficial process. You give the lender information about your income and debts, and you share your general credit situation. The lender might perform a soft inquiry into your credit, just to get an idea of your situation.

The pre-qualification is a ballpark figure of how much you might be able to borrow from the lender, and the rate you might be able to expect. However, a pre-qualification is mainly for the purpose of shopping around for the best loan rate.

You can’t use a pre-qualification when making an offer on a house you like, since it’s not an “official” mortgage amount. Instead, if you want a seller (or a seller’s real estate agent) to take you seriously, you need a pre-approval.


When you are pre-approved for a loan, the lender is making an official statement about how much you eligible to borrow. The pre-approval process is much more involved than the pre-qualification process. Where a pre-qualification might rely on undocumented information that you provide to the lender, a pre-approval requires that you submit documentation.

In order to become pre-approved, you need to fill out a loan application, and submit documentation showing your income. You also need to provide information about your assets, such as bank account statements and investment account statements. The lender will also perform a hard inquiry on your credit, taking a look at your credit score and your credit report. This inquiry will affect your credit score, and indicate that you are actively looking for credit.

A pre-approval is stronger than a pre-qualification. The pre-qualification merely establishes that you are qualified to apply for a loan, and that you might qualify for a certain interest rate. The pre-approval says that you have been cleared for a specific amount of money, and that you can lock in a particular interest rate for a set period of time.

For some homes, you are required to show your official pre-approval if you want to make an offer to the seller. Sellers and real estate agents want to know that you really do have the ability to buy before they spend time negotiating.

About Miranda Marquit

Miranda is a freelance writer and professional blogger specializing in financial topics. Her work has appeared in numerous media, online and offline. Her blog is Planting Money Seeds.

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