Mortgage borrowers (and some lenders) often use the terms “prequalified” and “preapproved” interchangeably, but they aren’t quite the same. Prequalifying for a home loan isn’t as involved — it simply gives you an idea of whether you’ll qualify for a mortgage, and if so, how much and at what interest rate. Getting preapproved requires more legwork and indicates that the lender is committed to moving forward with the mortgage.

Key takeaways

  • Prequalification is a simple, quick process that provides a general indication whether you would qualify for a mortgage.
  • Preapproval requires providing extensive documentation regarding your income, employment, savings and debt.
  • You can't use a prequalification as evidence of financing when making an offer on a home.

What is the difference between preapproved and prequalified?

The main difference between a preapproval and a prequalification: Preapprovals hold more weight when trying to buy a home.

Prequalifying involves providing some basic financial info to get a general idea of whether you can get a mortgage, how much you could borrow and the interest rate.

For a preapproval, lenders do a deeper dive into your financial situation and need more documentation.

What is a mortgage prequalification?

Some mortgage lenders give borrowers the option to see if they prequalify for a loan.

To get a prequalification, you’ll need to undergo a soft credit check — which won’t affect your credit score — and submit basic information about your financial situation.

A mortgage prequalification is only a general indication that a lender could approve you for a mortgage if you formally applied. It might be your first step in the homebuying process, and you can usually get a prequalification through a phone call or brief online application. Learn more about the pros and cons of prequalification to see if this step makes sense for you.

What is a mortgage preapproval?

A mortgage preapproval is a letter or written statement that specifies your maximum loan amount and the lender’s commitment to fund the loan if your financial situation remains the same.

To get a mortgage preapproval, you’ll need to provide extensive documentation regarding your income, savings and debt, such as credit cards and student loans. You’ll also undergo a hard credit check. Your mortgage lender uses this information to determine whether to offer you a loan, and at what maximum amount and interest rate.

The mortgage isn’t a done deal until the loan goes through underwriting and the lender confirms the information in your application. If there are discrepancies, your loan terms could be modified, or the lender might deny your application.

While it’s more complex than prequalification, you can still get a preapproval fast. Some online lenders issue preapproval letters in minutes. Others might require a full day or even a week to review the information you submit.

Regardless of how long it takes, the wait is worth it since you’ll need a preapproval in hand before making an offer on a home.

“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”

Prequalification Preapproval
No formal application required, but might require credit check Requires documentation and credit check
Provides estimate of how much you might be eligible to borrow Provides conditional loan approval
Relatively quick process and rapid response from lender Could take time to gather documentation and complete application, then take anywhere from a few minutes to a few business days for response
Not a viable approval, and not used when making an offer on a home Demonstrates to home sellers you’re a serious buyer and on track to full approval

Which should I choose: Preapproval or prequalification?

Both preapproval and prequalification are indications from a mortgage lender that you are eligible for a mortgage, but a preapproval is much more detailed — and more of a guarantee.

“Because prequalification may not always lead to loan approval, it is important for homebuyers to avoid making any firm plans based on their qualification status,” McBride says. “If the mortgage lending process were a highway intersection, prequalification would be the yellow traffic light and preapproval would be the green light.”

That green light is important in today’s housing market. Since some markets are especially hot, sellers might be getting competing offers. If they’re comparing one offer without a preapproval letter to an offer that does have one, they’re likely to go with the preapproved buyer — it’s a safer bet.

While there are differences between getting preapproved vs. prequalified, both processes usually involve credit checks: a soft check for prequalifcation and a hard check for preapproval. Only hard checks will impact your credit score, and typically, these are recorded as one inquiry on your credit report if they’re done within 45 days.

How to get started with the preapproval process

Before you ask a mortgage lender to preapprove you for a certain amount of money, look at your budget to determine how much you can contribute to a down payment. Most lenders will want an idea of what you plan to cover to have an estimate of your loan-to-value (LTV) ratio. Gather all the documentation a lender will request so you’re ready to hand it over.

Remember, just because you get preapproved or prequalified from one lender, it doesn’t mean you have to actually get your mortgage through that specific lender. Always shop around before you make the final call on a lender, because rates and terms vary. By shopping with multiple lenders, you can determine if you’re getting the best deal.