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Prequalification vs. Preapproval – What’s the Difference?

buying after bankruptcy

If you’re in the market for a mortgage, you’ll likely hear the terms pre-approval and pre-qualification. They sound similar but have significant differences that could make or break your home purchase. Here’s what you must know...

What is a Prequalification?

Getting pre-qualified is the first step when considering buying a home. However, there’s nothing concrete about it.

When you get pre-qualified, you get a verbal estimate of how much you can afford. Lenders don’t underwrite your loan application or ask for any proof of income, assets, or even your credit score.

Instead, a pre-qualification is a conversation between you and your loan officer. The LO asks you some pointed questions about your employment, income, current debts, and assets. They may also ask about your estimated credit score.

The underwriter can ‘pre-qualify’ you for a loan with the information you provided. In other words, the loan officer tells you how much you might be able to afford and which loan program is a good fit. They may write a pre-qualification letter, but again, it’s just an estimate.

What is a Preapproval?

A pre-approval takes your loan application and potential approval to the next level. Instead of verbally providing information about your qualifying factors, you’ll provide proof.

First, you’ll formally complete a loan application. Next, you’ll provide your loan officer with documents backing up what you stated on the loan application. These documents include:

· 30 days of pay stubs

· Two months of W-2s from all jobs

· Tax returns from the last two years if you are self-employed

· Two months of bank statements to prove your down payment and money for closing costs

· Proof of employment

· Approval to pull your credit

The loan officer reviews your information and writes a pre-approval letter based on the findings, which states how much you can borrow. A pre-approval is good for 60 – 90 days, depending on the lender, so you shouldn’t get one until you are ready to look at homes.

Sellers Want a Preapproval

When you’re ready to look at homes and place an offer, know that sellers want a pre-approval, not a pre-qualification.

A pre-qualification is an estimate. It’s a good option to determine if you can afford a mortgage and buy a house. But, when you’re ready to look at homes and consider buying one, a pre-approval letter is what sellers require to ensure you’re a serious and qualified buyer.

Final Thoughts

A pre-approval and pre-qualification are useful, but knowing when to use each is important.

The pre-approval holds the most weight with sellers and real estate agents but expires after a few months. If your pre-approval expires, you can have it renewed by allowing the lender to pull your credit again and providing updated paystubs.

The key is to know what you can afford before shopping for a home, so you bid only on homes you can afford.

About Streamline Home Loans

We Streamline the Process. From loan products to loan professionals, Streamline Home Loans actively seeks out the best in the industry to help our customers find, and fund, the right mortgage for them. Streamline's model is designed to raise the bar on efficiency, relationships, and integrity. We specialize in product variety, experienced teams, sophisticated software, and quick closings. We currently have multiple locations in NV, with licensing in AZ, CA, CO, FL, GA, NM, SC, and TX. Corporate NMLS# 1810048. Corporate headquarters in Las Vegas, NV.

For more information about Streamline Home Loans, visit us online at or call (877) 405-3747.

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