Pre-qualified vs. Pre-approved

Getting pre-qualified for a mortgage is fairly easy and the first step in the mortgage process. You contact a bank or loan officer and they will ask you several questions regarding your overall financial picture, including your debt, income and assets. They will then evaluate this information, and can usually give you an idea of the mortgage amount or purchase price you qualify for within minutes. Pre-qualification can be done over the phone or the internet, and doesn’t usually cost you anything.  For pre-qualification a lender typically does NOT include pulling your credit report or request copies of your financial documents.  This will be done at a later point in the process once you have chosen which lender you wish to use for your mortgage.  However, a lender will review your various mortgage options with you and recommend which will be best suited to your situation. 

Because this is only a preliminary step in the loan process, and its based only on the information you verbally provide to the lender, this is not a guarantee that you will be approved for this amount nor the rate will still be the same once you find the home you wish to purchase.  For this reason, a seller will not find a pre-qualified buyer as desirable as a pre-approved buyer who has been more thoroughly investigated. 

Getting pre-approved is the more desirable method, as it is much more detailed. You will complete a mortgage application and supply the lender with all of the necessary documentation they requested, such as paystubs, W-2’s, tax returns, bank statements, etc…  They will also pull a copy of your credit report at this point.  From this, the lender has a much better picture of what specific mortgage amount you are approved for. You’ll also have a better idea of the interest rate you will be charged.

With pre-approval, you should receive a conditional commitment in writing for an exact loan amount.  This will give you a much better picture of the true sales price you are approved for so you can start looking for a home within your price range. This step in the mortgage process also puts you at an advantage when dealing with a potential seller, as they will know you’re one step closer to obtaining an actual mortgage than someone who is only pre-qualified. Getting pre-approved for a mortgage also lets the seller know

that you’ve already started the loan process, your offer is serious and you can move quickly. This could prevent you from losing out to another buyer who doesn’t already have financing arranged. 

Once you have found the right house for you, you’ll fill in the appropriate details and your pre-approval will become a complete application. 


Once you find the right house and get your offer accepted, the loan officer will collect any remaining documentation, the appraisal, preliminary title report and escrow instructions, and submit everything to underwriting for final loan approval.  This final step, also called a “loan commitment”, is only issued by a lender when it has approved you, the borrower, and the house you’re purchasing. This means the lender has reviewed all of the documentation they requested and the home has been appraised no higher than the sales price. Your income, credit and employment will be checked once again to ensure nothing has changed since the initial approval.

Just a reminder – Pre-approved and pre-qualified are not the same thing.  Do not assume that just because you may have gotten pre-qualified that you are also going to be pre-approved.  The mistake could be very disappointing!  So, if you are serious about purchasing a home, it would be very beneficial to skip the pre-qualification and get pre-approved immediately. 




*This informational guide is a collaborative effort between Realtors® Karen May & Kara Brem and is for reference purposes only. They make no express or implied warranty regarding the information presented, assume no responsibility for errors or omissions and assume no liability for any loss resulting from the reliance thereon.