Mortgage Prequalification vs. Pre-approval
5 minute read
January 9, 2021


If you’re starting your search for a new home, you need to know that there is a difference between mortgage prequalification vs pre-approval.  Both terms help you in their specific ways in terms of getting an appropriate mortgage. They both will help you in your home buying journey and make you comfortable. Once you go through these details, it will surely help you understand the difference and borrow and choose an appropriate substantial offer regarding the property.

As we start to discuss mortgage prequalification vs pre-approval, you first need to understand these terms’ basics.

Mortgage prequalification

The mortgage prequalification is the way that helps the homebuyers to determine how much amount they are capable and qualified for getting a mortgage. The mortgage prequalification process tells us about all the available loans in the market for first-time buyers or by the government, helping buyers with the expectations.

If a buyer wants to get a mortgage prequalification for a home, they will easily contact the market’s local bank or may request online. Lenders present in the market use the term mortgage prequalification as a strong marketing tool. As it helps them target potential buyers that are much creditworthy and at low risk. All the offers related to mortgage prequalifications come in the form of phone calls or emails or include the details of introducing a mortgage.

Mortgage pre-approval

Compared to mortgage prequalification, mortgage pre-approval is the process that helps the buyers to identify and shop for the best deals and interest rates in the market. The mortgage pre-approval is like a physical exam of the buyers. It will help the lender ensure the buyers’ capacity to repay all the mortgage loan on time. A mortgage pre-approval is a letter with the mentioned amount that a lender agrees to give to the buyer as a mortgage.

With pre-approval, a lender can properly analyze the buyer’s debt, income, potential, and all the previous and present credit history. Buyers can also determine how many homes they can easily afford within the mortgage limit.

The pros and cons of mortgage prequalification vs pre-approval are also different, like the terms themselves.

Pros of mortgage prequalification

Afford and interest

It can help the buyers with the idea of how much they can afford and also help the buyers to consider the offer of a home in which they are interested.

Completion of goal

Mortgage prequalification can help a buyer with the closing cost and down payments. They will pay while getting a mortgage. As we all know, if a buyer manages the closing cost and down payment, this will help him with other expenditures in a better way.

Selection of home

This term will also help a buyer find the best mortgage option for borrowing and help with better decision making to select an appropriate home.


If a seller wants to sell a home to a potential buyer and the buyer is interested in buying. A prequalification letter can then help the buyer negotiate with the seller in a better and productive way.

Cons of the mortgage prequalification

Misleading income estimate

A prequalification provides the customer with misleading security if a report from the bank does not have a detailed credit review of the buyer, income, debt, and documents of all the customer’s assets. So in the case of mortgage prequalification, if you will be misled about your income, that will disqualify you for the mortgage.

Credit score

As a buyer, if you frequently prequalify during a month or 120 days, it will affect your credit score.

Pros of mortgage pre-approvals

Price Idea

If you are a first-time home buyer, then the mortgage pre-approval can help you with the price idea that you need to get a good mortgage and what type of price ranges exist and consider suitable in the market.

Controlling money

If you want to get a good mortgage and manage your money better, then your problem is solved. The mortgage pre-approval can help you manage your money better, and you can easily decide how much money you need to make your monthly payments.

Smooth runway

As a buyer, if you want that everything completes smoothly, then get the pre-approval letter now because a real estate agent can easily determine your needs and attend to them according to your choice.

Cons of mortgage pre-approval

Guarantee of a home loan

Don’t consider the mortgage’s pre-approval as the official approval. After getting a mortgage, there is a chance that you are disqualified. As a result of your credit score or finance which is not enough to support a mortgage.

Expires of mortgage pre-approval

All the mortgage pre-approvals do not remain forever. They have a set time. Several lenders provide you the mortgage pre-approvals with many expiry dates in a market. Some of them last even 30 days after getting the pre-approval. So if you cannot find a home that you like in these 30 days, you will be disqualified. Besides, you have to apply for a new pre-approval letter then. Due to all this, your credit score gets impacted, and it gets low.


I hope you will understand mortgage prequalification vs pre-approval very well. If you are a first-time buyer, then prequalification better suits you because it helps you budget and borrows money. In comparison, the pre-approval can be valuable. That is, if you want to make a good offer for a home in a competitive market. If you are still confused about any of these, contact Aceland Mortgage for expert guidance and advice.

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