Mortgage pre-qualifications and pre-approvals are the same thing?

Actually, no they aren’t. When it comes to buying a home, you will need a mortgage pre-approval or a pre-qualification before having an offer seriously considered by a seller. These generally tell the seller that you can actually afford to buy the home. So, what’s the difference?

Although there are variations from one lending institution to another, a general guideline is below.

A pre-qualification is quick and easy. A lender will base their pre-qualification upon what you tell them you earn, have saved, and what your debts are. They will also do a soft credit pull to see what your credit score is. Think of a pre-qualification as an unverified assessment of your qualification to get a mortgage and an estimate of the amount you should qualify to borrow.

A  preapproval is entirely different. Here the lender will have you submit W-2’s, tax returns, bank statements and more. They will do a hard credit pull and know everything about your debts. After analyzing the verified information, they will know exactly what you earn, owe, and have saved. Thus, they are able to accurately tell you the amount you will be approved for. In fact, you have already provided so much of the information that is required for the actual loan application and underwriting, mortgage approval is usually faster and easier.

Deals do fall through because a buyer is unable to get a mortgage for one reason or another and the seller has to put their house back on the market again. So, from a seller’s standpoint, if there are two identical offers but one has a mortgage preapproval (verified) and another only has a pre-qualification (unverified), which one do you think the seller will choose?