When it comes to financing your new home, it’s important to understand the difference between prequalification and pre-approval. Think of it this way:
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Prequalification = A casual conversation about your finances.
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Pre-Approval = A formal commitment backed by documentation.
📝 Prequalification
Prequalification is an initial discussion with a lender about your financial situation. You’ll talk through:
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Employment history and income
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Savings and assets
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Debts and obligations
This stage relies only on the information you provide and usually does not involve verification. It’s helpful for getting a general sense of what you might be able to afford, but it is not a guarantee.
✅ Pre-Approval
Pre-Approval takes things a step further. Here, your lender verifies your information with documentation and runs it through their financial system. This process reviews:
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Credit score
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Debt-to-income ratio
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Supporting financial documents (pay stubs, bank statements, tax returns, etc.)
From this, the lender can determine:
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Whether you’re financially ready to buy
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How much you’re approved for
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What your estimated mortgage payment will be
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The current interest rate you qualify for
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The type of loan best suited to your financial profile
Why Pre-Approval Matters
Getting pre-approved before you start house hunting gives you the advantage of shopping with confidence. You’ll focus only on homes within your budget, and when you find the right one, you’ll be ready to submit an offer backed by a pre-approval letter—showing the seller you’re serious and prepared to buy.
