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Mortgage preapproval vs. prequalification

Which one is right for you depends on where you're at in the homebuying process.

Prequalification involves an unverified account of your personal finances, as reported by you. Only after your lender or broker verifies those numbers can your prequalification become a preapproval. When shopping for a new home, you’re going to want to know the nuances between the two.

Prequalification tells you what you can afford

A mortgage prequalification is an estimate of how much you may qualify to borrow. To get one, you disclose your income amount, how much you have in savings and your approximate credit score to a lender. In return, the lender may give you documentation showing your preliminary qualification amount.

A prequalification allows you to get a feel for your mortgage options without dinging your credit. But because there’s no verification involved, the amount on the letter isn’t set in stone and can’t be used to secure a loan — it’s simply a frame of reference for your eyes only.

Prequalify before your house hunt

If you’re just beginning to search for a house, a prequalification is a good place to start. Getting one can give you a ballpark feel for how much home you can afford and whether now is the right time to buy a house.

Preapproval tells you how much you may qualify to borrow

Mortgage preapproval is when a lender takes a look at your income, assets and three-bureau credit report. They use this information to determine the loan amount and mortgage programs for which you might qualify.

Obtaining a preapproval is among the first steps you’ll take when shopping for a home. Home sellers want to feel confident that you can secure financing and buy their home. Accompanying your offers with a fully validated preapproval letter can help build that confidence and give you an edge over other applicants in a competitive market.

Get preapproved when you’re ready to buy

Though it’s one of the first steps in the homebuying process, you likely won’t want to get a preapproval letter until you’re actually ready to buy. Since getting a letter often involves having some skin in the game, it signals a buyer’s readiness to move forward.

Not all preapprovals are created equal

Your lender may send a preapproval letter before it’s fully vetted your qualifications. It may have pulled your credit report, but unless you provide your W-2s, bank statements, pay stubs and related financial documentation, there’s a chance you still might not qualify for the loan you want.

A written loan commitment without conditions can give your offer even more weight than a preapproval that’s missing documentation.

Compare preapproval and prequalification

Only a preapproval gives you a true edge in the homebuying process, though a prequalification can still be useful in showing you where you stand financially. Other factors to consider:

PreapprovalPrequalification
When should I choose this option?When you’re ready to shop for a new homeWhen you’re thinking about buying a new home
Will I have to fill out an application?YesNo
How long does it take?30–60 minutes5–10 minutes
CostOften freeTypically free
What information do I need?Credit report, income documentation and asset statementsA general idea of your credit score, income and savings
How long does it last?60–90 daysBecause it’s only a frame of reference, there’s no expiration
Will I know my interest rate?Not until you lock in a rate, but your lender may provide you with a range based off your credit reportNo

Preapprovals and prequalifications have some similarities

Though a lender doesn’t look upon them in the exact same way, there are some common threads between preapprovals and prequalifications. Both documents:

  • Can provide you with an idea of your borrowing power.
  • Show a certain level of commitment to a seller.
  • Could help your offer stand out in a crowded market.

Even though they’re often strong indicators of creditworthiness, neither option guarantees a mortgage.

Pick the one that makes sense for you

If you’re entertaining the idea of buying a home and need only a general idea of your qualifications, you may not need preapproval. Preapproval takes more time than prequalifying, and it temporarily drops your credit score due to a check on your credit.

When you’re ready to shop for a home, preapproval provides the details your lender and seller need to determine your ability to close on a loan. And you may need it even to put in an offer.

Compare mortgage lenders

Compare top brands by home loan type, state availability and credit score. Select See rates to provide the lender with basic property and financial details for personalized rates.

Name Product Loan products offered State availability Min. credit score
SoFi
(NMLS #1121636)
SoFi
Conventional, Home equity, Refinance
Not available in: HI, MO, NM, NY, WV
620
No hidden fees, multiple loan terms, and member discounts available.
Rocket Mortgage
(NMLS #3030)
Rocket Mortgage
Conventional, Jumbo, FHA, VA, Refinance
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
Better
(NMLS #330511)
Better
Conventional, Jumbo, FHA, Refinance
Not available in: HI, MA, MN, NV, NH, VT, VA
620
Online preapproval in minutes and no origination fees with this direct lender.
LendingTree
(NMLS #1136)
LendingTree
Conventional, Jumbo, FHA, VA, USDA, Home Equity, HELOC, Reverse, Refinance
Available in all states
620
Connect with vetted home loan lenders quickly through this online marketplace.
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Compare up to 4 providers

Bottom line

A prequalification can help give you a general feel for where you stand financially — but it’s an unverified document and is only intended for you. If you’re actually in the market to buy a home, a fully validated preapproval can give you an edge over other borrowers without one.

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