During the mortgage application process, pre-qualifying comes before pre-approval. Pre-qualification uses data the borrower supplies to obtain a ballpark estimate on how much they can borrow. It’s quick, but it isn’t a sure thing. Pre-approval is more definitive. The lender does a thorough credit and financial background check and can pre-approve a mortgage up to a specific dollar amount. In some cases, an interest rate can be locked in. The final step is a loan commitment, which is issued when the bank has approved both the borrower and the home.
- Pre-qualification doesn’t use verified information, so it is quick and may be done over the phone or online.
- Pre-approval is a more involved process after which the lender specifies an exact loan amount.
- The borrower’s credit profile will be checked again before the final step to ensure that nothing has changed.
“Pre-qualifying is just the first step. It gives you an idea of how large a loan you’ll likely qualify for. Pre-approval is the second step, a conditional commitment to actually grant you the mortgage.”