2 min read

Wondering what the difference is between getting your mortgage prequalified or preapproved? There’s a reason sellers and listing agents prefer the latter over the former. A home loan prequalification is a guess, while a mortgage preapproval is an accurate estimate based on verified facts. Here’s what you need to know about these two options.

How does prequalification work?

Prequalifying is easy – but can be ultimately useless. The process goes like this:

  • Fill out a prequal application with info like employment, income, assets, debt
  • Enter what you estimate your credit score is
  • Wait for a minute while the algorithm crunches the numbers
  • Get a loan amount back that you “could” be qualified for

That’s it. Nothing is verified, no credit check is done, and if you’ve gotten any of your numbers off by even a decimal point it could change everything. You can get a letter with this estimate of how big of a loan you can get on it, but a home seller isn’t going to give that a lot of weight.

You could use it for window shopping purposes, but what happens if you choose a neighborhood with home in that price range, then an actual loan application reveals you aren’t in that ballpark at all?

You’re going to have to do the whole process once you find a home you want to put an offer in on anyway. Why not get a real home loan preapproval and save yourself time and worry? That way you don’t end up with nasty surprises when your credit gets pulled, or find out your debt to income ratio (DTI) is too high.

How does preapproval work?

Preapproval takes longer and requires more information and documentation, but since everything is verified your chances of actually completing the loan approval process once you find your dream home ar considerably higher. The process goes like this:

  • Start your application online, or with a loan officer (LO) over the phone
  • Upload your documents through a secure online portal
  • Approve a “hard credit pull”, and wait for the LO to verify your information
  • You should get your preapproval letter within a day or two
  • Your letter will include preapproved loan amount and you can show it to sellers

Since the preapproval process can catch red flags before you make an offer on a house, home sellers can feel confident that you’re bringing a solid offer to the table and that your financing is unlikely to fall through at the last minute.

If you’re buying in a competitive market, and want an edge, ask your LO to kick the file to underwriting. Instead of just being reviewed by your LO, an underwriter will also review your file, and get it that much closer to full approval, pending appraisal, title insurance and homeowners insurance policies.

This can help you by allowing you to offer even more assurances, and a faster closing.

View loan limits in your area

Rates & Money is your go-to destination for free information about mortgages. Our home buyer guides and home loan articles are designed to help you make informed decisions when buying a home


Additional Free Tools

Use our free mortgage calculator tools to estimate your monthly mortgage payments based on your unique loan scenario. See how your monthly payment changes by making updates to your home price, down payment, interest rate, and loan term.

Stay informed with what's important to you

Subscribe for Notification

Notification popup

Selected options