While the words qualified and approved may have similar meanings, there’s actually a big difference between the two when it comes to getting a home loan. Being pre-qualified is a good start to show that you’re serious about buying a home, but getting pre-approved will get you much closer to the closing table. Let’s take a look at the main differences between being pre-qualified and pre-approved for a home loan.


Pre-qualification for a home loan pretty much comes after a cursory review of your finances and other information. You’ll provide the lender with details such as your gross income, all of your debts, and your total assets (savings, stocks, IRAs, etc.). The lender will calculate your debt-to-income ratio and let you know how much you qualify to borrow. In pre-qualifying you for a loan, the lender isn’t actually promising to lend you this amount or approving you for a loan at all. They don’t check to verify any of the information you provide. This step is really meant to let you know how much house you can afford based on the income and existing debts you report to them. In fact, if you really want to show sellers how serious you are and get the process moving along quickly, you can skip this step all together and go straight to getting pre-approved for a mortgage.


Being pre-approved for a home loan takes a much more in-depth look at your financial information. The lender will pull your credit report and check your score to get a look at your credit history. The debts reported there will also help them determine your official debt-to-income ratio and decide whether you’re a good candidate for a loan. You’ll need to submit official documents to them, including (but not limited to) paycheck stubs, W-2s, bank account statements, asset statements, and a list of any other real estate holdings. You’ll fill out a loan application, and the lender will go to work getting you pre-approved for your home loan. Be aware that once you get that pre-approval, you’ll need to get the ball rolling, as most loan pre-approvals are typically good for 60 to 90 days. Also make sure not to do anything that could jeopardize that approval, like opening up a new credit card, making a large purchase, or changing jobs.

If you’re ready to get down to business and buy right now, it’s best to go ahead and get pre-approved. Skipping the pre-qual process completely can help you get to the closing table much faster. But if you’d rather take your time and wait for that perfect home to come on the market before pulling the trigger, pre-qualification might be the way for you to go. Always talk to your trusted lender and your real estate agent for the best advice tailored to your specific situation.  




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