Should You Get Pre-Qualified or Pre-Approved?

By Wendy Volk          

Prudential Cheyenne Real Estate

That depends on whom you ask. It seems that definitions can vary from lender to lender and individual to individual.

While most discussion, written and verbal, compares pre-qualification to pre-approval, lenders actually offer three levels of services to qualify a borrower for a mortgageā€”pre-qualification, pre-approval and final commitment.


Usually, in just a 15-minute phone call, a lender can pre-qualify you for a mortgage. Because the lender’s underwriters do not validate credit history or employment information for pre-qualification, this preliminary review results in a non-binding opinion regarding how much of a mortgage a borrower can afford. By seeking pre-qualification, you’ll come away with an estimated monthly payment and a price range to shop based on the loan size. This information, however, is intended to be a guide as you begin the home buying process. It does not guarantee that you’ll be approved for a mortgage.


The closest thing to a guaranteed loan comes with pre-approval. After completing a formal application and providing all the necessary documentation related to employment and financial disposition, the file, along with a full credit report, will be thoroughly evaluated and verified by the lender’s underwriters. If everything meets to their satisfaction, you will be cleared for a loan of a determined amount. This in no way means you have a firm commitment though. The loan is subject to a fully executed sales contract and an acceptable appraisal.

But being pre-approved can give you a sizeable advantage. Many lenders present borrowers with a letter, which may give you more leverage with a seller.

Firm Commitment

The lender can issue a firm commitment once the seller accepts your offer, the home has received a satisfactory appraisal, and your credit has been rechecked. If all checks out, you’ve got a mortgage!

To help eliminate unwanted surprises, keep these tips in mind:

Ø      Make sure a lender’s pre-qualification program is underwritten.

Ø      Don’t divulge to a seller how much you’ve been approved for.

Ø      Be alert. Many lenders use the term “pre-approval,” but when you read the fine print, it’s really a pre-qualification. If the lender hasn’t requested documentation, it’s a good bet that you’ve been pre-qualified rather than pre-approved.

Ø      Contact the lender if your financial circumstances change prior to closing. The pre-qualified or pre-approved status may no longer be valid.

Wendy Volk
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