Mortgage Pre – Approval is Worth More Than Being Pre – Qualified

The words look and sound the same, but being pre-qualified and pre-approved for a home loan are different things. Let us take a look at their differences and how they compare to a full loan approval.


The process of getting pre-qualified for a home loan is quite easy. You can do so in person at a local bank or mortgage lender or better yet, on the phone or via the internet. The service is usually free of charge. The lender will ask you for very basic personal and financial information. Be prepared to provide your:

  • address and how long you have lived there
  • total income
  • total debts
  • current assets
  • overview of your credit standing

The lender will use this information to estimate what you will likely be able to borrow. This is an “educated guess” and is simply used to ballpark the price range for your new home.

While this information is very important to you in terms of budgeting for your home, it may or may not impress the seller if you are hoping to use it as bargaining tool. The sellers are aware that the mortgage lender is not committed to providing you a home loan as a result of running these numbers for you. The seller will want more.

Additionally, because the lender did not verify your accounts or debts and in most cases did not pull your credit report, the pre-qualification letter will be chock full of disclaimers. The pre-qualification statement will be subject to:

  • a formal mortgage application
  • verification of employment
  • verification of assets
  • overview of debts
  • credit rating and score
  • additional underwriting guidelines


A mortgage pre-approval takes the pre-qualification process a few steps further. A pre-approval will impress a seller and will give you even more confidence regarding your home buying budget. And as a bonus, getting financing out of the way will let you focus on picking the right home in the right neighborhood (the fun part of home buying).

A pre-approval requires a formal application process. Be prepared to provide:

  • pay stubs for last 30 days
  • two years tax returns and W-2′s or business tax returns
  • proof of other income
  • proof of other assets (stocks, pension funds)
  • three months of bank records for all accounts
  • source of your down payment
  • contact information for employers for the last 2 years
  • contact information for landlords for the last 2 years
  • current debt information: account numbers, payment amounts, balances, etc.

Upon approval you will receive a formal pre-approval letter. This will be a written commitment from your lender which your sellers will be thrilled to see. Be aware however, it is not free of conditions, yet.

When the lender pre-approved you, it was only for the amount of money which you can afford for the purchase of your home. Remember, you have not yet found that home. When you do, the lender will insist on an appraisal of the property so they can be sure they are not lending you more money than the house is worth.

Additionally, if there is a significant amount of time between your pre-approval and when you find your home, the lender will want to make sure there are no changes in your employment status, financial situation, or credit worthiness. When you are ready to close on the loan, the lender will re-verify your information.

Your mortgage loan will be fully approved when the appraisal is complete, the title search is done, your information is re-verified and a credit-check is re-run.

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