Pre-approval vs. Pre-qualification: What’s the Difference?
So, you’re about to buy a home (congrats!). Before you put in an offer, it’s a good idea to get pre-qualified or pre-approved. But what’s the difference?
Let’s start with how they’re similar. Both pre-approval and pre-qualification are ways of showing a seller that you’re serious about purchasing a home and that you’re financially able to do so. Whether you should move forward with one or the other depends mostly on your timeline and how much work you want to put into the process upfront.
Pre-qualification
- Relies on self-reported information, so it’s less official.
- Usually requires only a soft credit check, which won’t hurt your credit.
- Provides more of a ballpark estimate of how much you can afford.
- Usually only takes a few minutes.
Pre-approval
- Requires verification of income, such as paycheck stubs.
- May required a hard credit pull, which could hurt your credit slightly.
- Provides a more accurate estimation of what you can afford.
- Usually takes longer, but may give you a head-start on your mortgage application, if you already know which lender you want to use.
Getting pre-approved with a lender is a much longer process, akin to applying for a mortgage. For this reason, pre-approval is considered a little more “legit.”
If you know for sure which lender you want to go with, it’s a good idea to go ahead and get pre-approved, because it will save you time later and make your home offer even more competitive. But if you’re not sure which lender you want to use yet, and simply need a letter to include in your offer, pre-qualification is much easier and will take less time.
Ultimately, either option will work to indicate intent and financial viability to sellers, so pick the route that makes the most sense for you. Happy house hunting!