Pre-Approval vs. Pre-Qualification: What’s the Difference and Which One Do You Need?

The difference between Pre-Approval and Pre-Qualification often boils down to the creditor, and the type of loan you’re applying for. In some cases, creditors can even use these terms interchangeably, creating ever more confusion for the customer.

Knowing what these two terms refer and their difference is essential when you start looking into potential lenders to help finance your home.

Here’s a quick breakdown of these terms, and who they may be better suited for.

What Is Pre-Qualification?

Pre-Qualification typically means that a creditor has done a bit of research into you as a customer and that you are likely to qualify for a loan or a credit card. The requirements to begin the process of Pre-Qualification can vary from submitting basic information about your finances like your annual income to even a soft inquiry of your credit score (a soft inquiry does not impact your score).

If you are pre-qualified, you can move on to the next phase and undergo a full review, where you’ll be asked to send in more documents, and a hard credit inquiry.

Note that getting pre-qualified doesn’t guarantee you will be approved for the loan, but if you don’t get it, you know you should look for another creditor.

What Is Pre-Approval?

In some cases, a pre-approval may be a better indication of whether you’re going to receive a loan or not, but it will depend on how the creditor runs the process. Some creditors may use both of these practices, in which case the pre-approval process involves a more in-depth review of you as a potential borrower.

Additionally, in the pre-approval process, the borrower generally has to submit an official mortgage application, which is not needed for pre-qualification.

Which One Do You Need?

There are definite advantages to both, as it prevents you from wasting time looking at properties that are too expensive, and you get a better sense of what your budget is. Additionally, considering both these processes generally only take a few days, you can have your results from the creditor rather fast, and plan for your next steps.

You may be able to skip the pre-qualification process, as it is generally a more shallow review, and go straight into the pre-approval process instead. However, it will depend on the lender, and how they’ve set up their processes. Some lenders may not even have two separate operations, to begin with.

The SeanZ Team Is Here to Help

If you’re looking to buy a home in St. Louis, the Sean Zalmanoff Mortgage Team is more than happy to assist you in getting a mortgage to help finance it. We specialize in making the home purchase or refinance process a great experience. Give us a call today at (314) 361–9979 or visit us online HERE.