Mortgage prequalification vs. preapproval

The difference is subtle, but it can have important implications.

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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.

What is mortgage preapproval?

Mortgage preapproval is when a lender takes a look at your income, assets and three-bureau credit report. They use this information to determine how much you can afford in a home and the mortgage programs you qualify for.
Obtaining a preapproval is among the first steps you’ll take when shopping for a home. Home sellers want to feel confident that you’ll be able to 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.

What is mortgage prequalification?

A mortgage prequalification is an estimate of how much you may qualify to borrow. To obtain one, you tell a lender how much you make, how much you have in savings and approximately what your credit score is. In return, the lender may give you documentation showing what you might qualify for.

A prequalification allows you to get a feel for your mortgage options without dinging your credit. But because there’s no verification involved in a prequalification, you should never use one for practical purposes in the home buying process. It’s simply a frame of reference for your eyes only.

What’s the difference between prequalification and preapproval?

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

When should I choose this option?When you’re ready to shop for a new homeWhen you’re thinking about buying a new home
How long does it take?30–60 minutes5–10 minutes
CostTypically 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

Preapproval vs. prequalification: Which one makes more sense?

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.

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 a loan.

To avoid unnecessary complications, make sure your lender receives all the documents it requires for preapproval before you make an offer on a home.

Compare lenders that can help you get preapproved or prequalified

Name Product Min. credit score State availability Loans offered
New American Funding
Not available in: HI, NY
Conventional , Refinance, Jumbo, HELOC, FHA, VA, USDA, Reverse
Loan officers work with you to find the right mortgage to fit your lifestyle and budget.
Axos Bank
Available in all states
Conventional, Refinance, Jumbo, Home Equity, Fixed, Adjustable, FHA, VA, USDA
Explore a full suite of home loan options with this direct online lender.
Figure Refinance
Apply in minutes for a cash-out refinance quote that won't hurt your credit.
Not available in: AZ, HI, MO, NV, NY, RI, UT, WA, WV
Conventional, Refinance, Jumbo
Prequalify in minutes and then compare home loan options from several top online lenders.
Available in all states
Conventional, Refinance, Home Equity, HELOC, Jumbo, Reverse, FHA, VA, USDA
Connect with vetted home loan lenders quickly through this online marketplace.
Available in all states
Conventional, Refinance, Home Equity, Jumbo, Fixed, Adjustable, FHA, VA, USDA
A nontraditional lender offering impartial guidance on a range of loans.
Rocket Mortgage
Available in all states
Conventional, Refinance, Jumbo, FHA, VA, USDA
Streamline your mortgage from quote to final payment — all from your computer or phone.

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. To get started, compare your mortgage options to find the right fit for you.

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