Pre-Qualification vs. Pre-Approval Explained...

By
Real Estate Agent with RE/MAX Fine Properties 0451975

Quite a few buyers want to know what the difference between a pre-qualification versus a pre-approval is. Confusing the two can often lead to disappointment for borrowers who believed they were actually pre-approved for a mortgage. To avoid a sticky situation later down the road; we’d like to explain the difference between the two!

Pre-qualification:

Is only based on information stated by the borrower.
Lender grants a pre-qualification without reviewing the clients documentation/application/credit.
It gives the borrower a loose idea of how much they may be eligible to borrow.

Pre-Approval:

Is released after the lender reviews credit and income documentation.
An application must be submitted for review as well as submission into underwriting (automated/manual)
Gives the borrower a more concrete understanding of how much they are eligible to borrow.
The best option is the ask your client to be pre-approved versus pre-qualified with their lender so that all the parties involved in the transaction will not run into any unnecessary confusion/disappointment later down the road!

Comments (13)

Paul Collier
Patriot Home Mortgage - Huntington Beach, CA
Paul Collier

Great reminder and explanation. I have several clients who believe it's the same thing. If I can't get a pre-approval, I get the most thorough and promising pre-qualification I can. 

Jun 12, 2015 09:56 AM
Scott Gleason, CRS
Coldwell Banker Realty - Westfield, NJ
Westfield NJ New Homes Specialist

Hello Sallie,  Welcome to the Active Rain community! This is something we should make sure first time home buyers understand.  Thanks for sharing!

Jun 12, 2015 10:07 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Sally - Thank you for the information on between pre-qualification vs. pre-approval.

Jun 12, 2015 01:24 PM
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Sallie Wheeler good explanation of the differences between the two....many thing they are one in the same....

Jun 12, 2015 07:49 PM
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

and welcome to ActiveRain.... keep those blog posts coming....

Jun 12, 2015 07:50 PM
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, eXp Realty - Kalispell, MT
Helping your Montana dreams take root

Welcome to ActiveRain!  True, those two things are definitely different, and a pre-approval is more detailed/accurate.

Jun 12, 2015 11:00 PM
Captain Wayne - Rowlett Real Estate School
Rowlett Real Estate School - Panama City, FL
Rowlett Real Estate School / Owner and Instructor

Hi Sally, thank you for this great infomation.  Keep up the good work!

Jun 13, 2015 10:58 AM
Captain Wayne - Rowlett Real Estate School
Rowlett Real Estate School - Panama City, FL
Rowlett Real Estate School / Owner and Instructor


Welcome to ActiveRain,  it's great to have you aboard.  I look forward to reading more of your posts!

Jun 13, 2015 10:59 AM
Wenceslao Cortes
Charles Rutenberg Realty - Hudson, FL

Hi Sally, Welcome to Active Rain. Thanks for the useful information between the two.

Jun 13, 2015 01:05 PM
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Jun 15, 2015 11:02 AM
#11
Chris Shull
ColumbiaLand Realty - Columbia, SC
Your Realtor For Life!

Great first post here on Activerain! This is information every agent should know and understand!  I look forward to reading more from you in the future!

Jun 15, 2015 09:07 PM
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

You're off to a rousing good start in my book Sallie & Shayla. Welcome and thank you for knowing the difference.

Jun 17, 2015 11:05 AM