The Difference Between Pre-Qualified & Pre-Approved

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If you’re thinking of buying a home in the near future, you’ve probably started reading up on a lot of the terms related to mortgages. Mortgages are a type of loan you can use to purchase a home. The bank or credit union purchases the house from the seller, and you pay that amount, plus interest, back to the lenders. Fortunately, mortgages make buying a home a realistic possibility for many people. Unfortunately, they come loaded with terms and technicalities that can be pretty confusing.


  • The terms pre-qualified and pre-approved are often used interchangeably, depending on the loan company.
  • If you’ve been pre-qualified or pre-approved, it means the lender has agreed to lend you money — however, it is not set in stone and is not a formal guarantee of a loan.
  • Some companies may consider pre-approval to be a more serious step than pre-qualification, but this is not universal
  • You can use pre-approval or pre-qualification to show a seller you will likely obtain the money you need.
  • Lenders often check your credit before issuing a pre-qualification or pre-approval.

Two terms that you may have encountered during your mortgage research are pre-qualified and pre-approved. These terms basically describe the situation where the bank or credit union has decided you’re a trustworthy person to lend money to. However, the exact usage differs depending on context, and the advantages of having a pre-qualified vs. pre-approved mortgage can differ too. We’ll cover all that and more in the following post. Read through for a thorough look at pre-qualification and prea-pproval, or just click on one of the links to go straight to the corresponding section.

What does pre-qualified mean?

Pre-qualification is the process where a lender begins to decide whether you are eligible for a mortgage or other loan. During this phase of the lending process, you’re still under review for the loan. The bank, credit union, or other lending agency has not yet decided for sure whether you are a trustworthy lendee, but they have begun their assessment.

Some loan agencies may use the term pre-qualified to mean that you have successfully submitted the materials you need to qualify, and the lender may even give you a basic estimate of the amount you’re likely to be approved for, along with an expected interest rate — the average in the US is around 3.75%. When they ask for financial information, it may include items like:

  • Basic yearly and monthly income information
  • Current outstanding debts
  • Any assets you own, like property

Once they’ve reviewed this information, they may issue you a letter saying that you have pre-qualified for the loan. This is not a guarantee that you will receive the loan. After further investigation, if you inaccurately reported some of your financial history, they may not follow through with the offer. However, it’s generally a pretty good sign. In addition to that, you can actually use a pre-qualification letter to your advantage. It signals to the seller of the home that you will likely have the funds you need to make an offer.

In some cases, pre-qualification will only require that you supply info on these topics yourself. Other times, the bank or loan agency may perform its own check. The bottom line is that it really just depends on the policy procedures of the organization you’re trying to obtain the loan from, but getting a letter declaring your pre-qualification can be useful when trying to close the deal on a new home.

What does pre-approved mean?

Pre-approval is a statement by the bank, credit union, or lending agency that you will likely be able to qualify for a mortgage or other loan. It is used mostly in the same way as pre-qualification, but can carry some different connotations depending on the lender. During the pre-approval process, the lender may also perform an inquiry into your financial life to determine whether you’re going to be a trustworthy borrower. They will probably look into basic information like:

  • Your yearly and monthly income
  • Any outstanding debts or other mortgages in your name
  • The assets that you hold
  • A credit check is more likely

In most cases the bank or credit union may perform a hard credit check as part of determining your trustworthiness as a lender. This involves the bank or lending agency inquiring about your credit with one of the three large credit-reporting bureaus.

Note: Your credit score is basically a measure of how trustworthy of a borrower you are, and it’s also just a basic indicator of you overall financial well-being—though it’s not always the full story. The score, usually between 300 and 800, is based on your history as a borrower, including everything from credit card payments to student loans. Two common models for credit score you may have heard of are FICO and VantageScore; these are basically equivalent credit-reporting institutions’ ways of measuring your creditworthiness. A score above 700 is usually considered fairly strong, and in the ballpark for mortgage eligibility. We’ll cover more on how your credit score relates to the mortgage process in a later section.

Note: Turbo uses the VantageScore model to provide consumer credit scores. Check out our post on how to check your credit score to learn more.

During the pre-approval process, the lender will also give you a more specific idea of the amount of money you qualify to borrow, and the interest rate you may be able to expect. These are determined in part by your credit score and other factors like income and assets. Ultimately, the answer to the question “what does prea-pproved mean?” just depends on the agency you’re trying to get a loan from. It may even differ from pre-qualification in some ways. Let’s take a look at that now.

What are the key differences between pre-qualified vs. pre-approved?

There’s not a whole lot of difference between pre-qualified vs. pre-approved. According to, the exact differences in the usage of these terms will depend on the specific loan company you decide to work with. That said, there are a few general points that can be made.

Some banks consider pre-qualification to be a step before pre-approval. Thinking of it this way, pre-qualification is the first step in seeing whether you will be able to secure the funding you need. You can even get pre-qualified by a couple of different banks as part of your shopping process.

Pre-approval is the next step, when creditors decide more formally that you’re a safe bet. This sometimes includes an actual offer for a loan — though it’s not yet guaranteed, as nobody’s signed any contract yet. Demonstrating your pre-approval can be a really great way to show a seller you’re serious about buying, and could put you ahead of potential buyers still waiting on hearing back from their lending agency.

Take a look at this graphic for a summary of the differences you’re likely (though not guaranteed) to encounter.

The bottom line is that pre-approval is more likely to require a credit check, and pre-qualification might not. That will depend on the specific lender, however, so don’t be surprised if the pre-qualification process for a lender does involve a credit check.

More about the mortgage process

The mortgage process can be pretty confusing. Getting pre-qualified or pre-approved is an important step, but you might be a little lost on how to get there. Let’s get clear on some important concepts that you should be familiar with before you try to get pre-approved.

What factors affect my mortgage application?

There are a number of factors that affect whether you will be pre-approved for a mortgage. Three of the biggest ones, however, are your income, your credit history, and the size of your down payment.

Income: A good rule of thumb when you’re shopping for a home is to remember that your housing costs (rent or mortgage + utilities and maintenance) shouldn’t account for more than a quarter of your overall budget. Lenders care about this too, and though they may not stick to that rule when deciding whether to approve you, they will care about the amount of money you’re bringing in.

  • Credit history: How trustworthy of a lender are you? Do you diligently repay loans that you take out, or do you often fall behind on payments? Does your credit card carry a growing balance? These kinds of questions affect your credit score. Mortgage lenders want to know that not only are you financially capable of repaying your mortgage, you’ve got a good track record of prioritizing repayment.
  • Down payment: The more money you can put down up front, the less you’ll have to borrow. That means you could secure a better interest rate, and you’re more likely overall to actually receive the mortgage.

Securing a pre-approval or pre-qualification depends on proving yourself to the lender through these factors, so it’s wise to have a steady source of income, solid credit score, and the ability to put down a reasonable down payment before applying.

Where do I apply for a mortgage?

You can apply for mortgage options from a variety of places.

  • Your bank may offer home loans. It’s a good idea to talk with representatives from your bank to find out what their options might be.
  • Your local credit union also may be a great place for first-time homebuyers to look for a loan. They may offer competitive rates and have special incentives for local borrowers.
  • Online lenders are also an option that are readily available, but it’s wise to be careful with these. Some are genuinely reputable, but others may make too-good-to-be-true offers that may be financially risky.

Remember, not everyone uses the same language regarding pre-qualified vs. pre-approved mortgage, so be sure to ask about this when you apply for a mortgage. Your lender can provide more specific information about their preapproval vs. prequalification procedures, so don’t hesitate to ask for clarity!

What do I do once I pre-qualify or have been pre-approved?

Once you’ve been pre-qualified or pre-approved for a mortgage, you can request a letter from your lender that reflects that status. This can be used as leverage in negotiations with sellers to show that you’re serious about making an offer. It’s always a good idea to have proof of your willingness to buy, as sellers can be nervous that a buyer will either pull out or be unable to actually purchase the home if they can’t prove their ability to secure funding.

Key Takeaways

Before you go, it’s a good idea to hang on to these info bites:

  • Pre-approved and pre-qualified are terms that are used in similar contexts
  • They mean that the lender has tentatively agreed that you would be a good loan recipient
  • Pre-approval is sometimes used as a more strict condition, requiring a more thorough financial review and credit check by the lender
  • The use of each term depends highly on the specific lender you’re working with
  • Pre-approval and pre-qualification can be used to demonstrate your ability to secure funding and willingness to buy a home

Written by Mint

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