- Pre-qualification: you provide information to the lender about your income, debt, and assets and the lender gives you a rough estimate of the size of the mortgage you could afford. Usually pre-qualification does not involve checking your credit history. This process takes a few hours at most and is usually free.
- Pre-approval takes pre-qualification one step further: getting pre-approved makes sense if you are ready to get a mortgage. The lender contacts your employer, bank, credit reporting agencies, and others to confirm your income, assets, debts, and credit history. If you’re pre-approved, you’ll get a letter that says your mortgage is approved for a certain amount of money and for a certain amount of time. A small fee might be involved to cover application costs.
| If you’re a first-time homebuyer, you should try to pre-qualify or get pre-approved for a mortgage loan. Getting pre-qualified can give you more confidence about knowing how much you can afford. Getting pre-approved, which takes pre-qualification one step further, can make you more attractive to the seller of the home. Being pre-qualified or pre-approved does not mean you have to use that particular lender, but you may be in a better position when you negotiate with the seller of the house. What’s the difference between pre-qualification and pre-approval? Though people sometimes use these terms interchangeably, they mean different things. | |