Pre-Qualification versus Pre-Approval?

There have been a number of questions in Zillow Advice recently about the difference between pre-qualifications and pre-approvals.  This article attempts to provide a brief explanation of each and directions for getting started.

Pre-Qualification
A pre-qualification is getting an estimate of how much you can afford for a mortgage payment.  You typically provide self-reported income and debt information to a lender and they give you an estimate of the amount you can borrow.  Since the information you provided is not verified by the lender, the pre-qualification does not carry a lot of weight.  However, this discussion can be very informative and useful for buyers.  Another option is to use free calculators to find out how much you can afford.

Pre-Approval
Getting pre-approved means a lender has pre-approved you to borrower a certain amount of money. Pre-approvals are more significant than qualification letters because lenders spend the time to verify your credit, income, employment, and assets.  This includes a credit check.   Approvals are very important when shopping for homes since they make you a serious buyer.  Real estate agents and sellers are more willing to deal with buyers who have preapprovals because they know they can afford the house.

Keep in mind that pre-approvals are not guarantees for a mortgage.  Lenders still need to consider property appraisals and re-confirm information before they fund a specific home.

Getting Pre-Approved
To get pre-approved, you can talk to any mortgage broker or banker.  Start by filling out a loan request on Zillow Mortgage Marketplace or by selecting a lender in the lender directory.  You can then ask them to pre-approve you for the desired amount.  When you are ready to get your mortgage, you can either go back to the lender who pre-approved you or complete another loan request on Zillow to compare rates again.  Remember, you do not need to get your mortgage through the person who pre-approves you.

Learn more about pre-approvals and required documents.