What is a Mortgage Prequalification?

In simple terms, being mortgage prequalification means that a lender has collected your basic financial information. Also, sometimes have completed a credit check, to give you an estimate of how much house you can afford.

What is Mortgage Preapproval?

A mortgage preapproval is one step ahead than mortgage prequalification. For a mortgage preapproval, you complete a mortgage application. Therefore, the lender will then verify the information you provide, and will also perform a credit check. Hence, if you are eligible, you will get a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount. Important, this preapproval offer is valid for 90 days.

Mortgage Prequalification vs Mortgage Preapproval: What you Need to Know

Purchasing a home is a process, and in the current competitive market. However, it makes sense to set yourself up for a successful experience. So, getting pre-qualified for a mortgage loan proves to be a key advantage.

 What Information Do You Need to Provide?

Mortgage Prequalification	Mortgage Preapproval
Employment Information	Copies of pay stubs that show your most recent salary information
Credit Check	Credit check
Basic Information about bank accounts	Bank account number or two most recent bank statements
Down payment amount and desired loan amount	Down payment amount and desired loan amount
No tax information is needed	W-2 statements, personal and business tax returns from the past two years

Mortgage Prequalification vs Mortgage Preapproval Comparison

	Prequalify	Pre-approval
Benefits	You can start looking for houses knowing how much you will be able to afford	You will be ready to make an offer to the seller. It will gain you competitive advantage over other potential buyers.
Process	Provide basic financial information to the lender and get a mortgage prequalification letter within minutes.	After submitting the required documents for the loan application, you will receive a decision within 10 business days.
Documentation	Need to answer a few questions designed to evaluate your financial situation, plus a credit check	Need a proof of financial information, plus a credit check

Mortgage Prequalification vs Mortgage Preapproval: Which One is Right for You?

For first-time homebuyers, a mortgage preapproval tends to be more helpful. Especially when they are establishing their budget for home buying and need an idea of how much they might be able to afford.

Finally, pre-approval comes out really handy when the homebuyer is ready to make an offer on a house. Especially in a competitive market where you might want to stand out among other potential buyers. Therefore, the seller will take your offer more seriously if you have your creditworthiness and finances verified from a lender.

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