Knowing the difference between getting pre-qualified for a loan and pre-approved for a loan equips you to have the right information at the right time.
Getting pre-qualified for a loan gives you an idea of how much you might qualify to borrow. You have not actually applied for a loan and the mortgage lender has only your word on your income, assets and liabilities. None of your information has been verified, the loan amount is in no way guaranteed. You may be given a pre-qualification letter that merely states you are likely to be approved for a mortgage. Getting a pre-qualification is generally very fast and you can even pre-qualify for a mortgage online in only a few minutes.
Getting pre-approved means that not only have you given the mortgage lender information on your income, assets, and liabilities, but your information has been checked and verified. The mortgage lender may also have pulled your credit report to learn about your credit history and credit-worthiness.
Getting a pre-approval letter means that you are likely to be approved for a mortgage and also states the amount for which you may be approved. It carries much more weight than a pre-qualification letter.
It’s important to remember that you are not guaranteed to get a mortgage if you are pre-approved or pre-qualified. Many things can happen during the process—some lenders may give out pre-approval letters without actually verifying your information or a borrower may not give completely accurate information about his situation.
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