Pre-Approval vs Pre-Qualification: What’s the difference?

The words pre-approval and pre-qualification are sometimes used interchangeably. But here we’ll break down a general overview of the terms pre-qualification and pre-approval, as they are typically defined.

Pre-Qualification vs. Pre-Approval

The term pre-qualification is typically used to describe the first step in the mortgage process. This is usually less of a hassle and can be done over the phone or online, by completing a form. This will give you an idea of the amount of money the bank will finance, but it is not certain and it isn’t based on a detailed credit report so the figure may change after the pre-approval is done.

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Pre-approval on the other hand can be considered the second step in the mortgage process. After being pre-approved you may be surprised at what the bank is willing to lend and be able to get that home with that beautiful home theatre in the basement.

When it comes to pre-approval vs pre-qualification, pre-approval is usually a more time consuming and detailed process. While getting pre-qualified won’t require a credit report, getting pre-approval will; it is not a guarantee that you’ll be approved for a mortgage or you will be approved for the amount that is in the pre-approval letter, but it is for sure more reliable than a pre-qualification amount.

mortgage pre-qualification

What is required to be Pre-Approved or Pre-Qualified?

In order to receive pre-qualification, the lender will only ask that you give a verbal account of your debt to credit ratio. They will ask you to provide your monthly income, disclose any debt and possibly ask you to give them your credit score (this is not a credit check).

To be pre-approved however they will ask for proof of the above information. This will include, asking you to give them permission to run your credit, providing pay-slips and/or employment letter/ contract, banking and investment statements and other documents, where necessary.

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How long does Mortgage Pre-Approval last?

The length of the pre-approval mortgage process is heavily dependent on you and how quickly you can gather the supporting documents needed for pre-approval. After all the documents have been handed over, you will typically wait a maximum of 10 days before receiving your pre-approval letter, after which the letter is valid for 90 days (in most instances).

Is Pre-Approval better than Pre-Qualified?

Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers.

At the end of it, get what is best for your marketplace and with this new information, you can make your own informed decision.

Best of luck with your house hunting, from The Residential Buyer.

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The Residential Buyer : Thoughts

We at The Residential Buyer think it’s a great idea to even consider getting more than one pre-approval letter from more than one lender; you can get multiple pre-approvals in a 30 day period, but it is important to note that this will be displayed as a ‘hard inquiry’ on your credit report. Nonetheless, it can be the difference between being fully approved for a loan with no options and instead HAVING options. Either way, shop around a bit and ensure you are getting the best rate possible.

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