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Mortgage Pre-Qualification vs. Pre-Approval

on 10/1/2016

Couple standing in front of home


You’re ready to purchase your first home.  You have a steady job, some savings for a down payment, but you aren’t sure what to do next.

Pre-qualification is typically the first step in the mortgage process.

It is usually a quick and simple process that will give you a general idea of how much home you can afford with monthly payments that will fit your budget and qualifications.

When getting pre-qualified your Lender will ask you questions to get a good feel of your financial profile. 

You will be asked to provide:

  • Information about your employment & income
  • a list of your assets
  • information about debt that you currently owe

Once your lender has run some initial calculations, you will have a much better idea of the price point to focus your home search. 

This is also a great time to begin to discuss various mortgage loan programs that would work well for your situation, such as a first time home buyers mortgage, and how much savings you will need for a down payment based on the financing options available to you. 

A pre-qualification is based on information you provide and therefore is a quick analysis and may not always be precise.

It’s important to understand, a pre-qualification does not provide you with an approval.  At this point, there are many other factors that are needed to actually get an approval. 

With the pre-qualification in hand, you can start house hunting with the knowledge of how much you can afford.


Before you shop, get a pre-approval letter.   

Most Real Estate Agents won’t even begin to help you start to look for a home without a formal pre-approval letter.  A pre-approval will allow you to present offers on homes that fit into your qualified price point.

A pre-approval is more precise than a pre-qualification and documented. While a pre-qualification is based on information you verbally provide, a pre-approval is most often documented to support that information.

For the pre-approval letter, a few extra steps will be taken.

At this stage the mortgage lender will:

  • review pay stubs, W2’s and possibly tax returns to verify income
  • request asset statements confirming enough liquid funds are available to close and any needed reserves.
  • pull a credit report from the three major credit bureaus
  • verify your monthly obligations
  • review your credit score and credit history

Your Lender will likely ask lots of questions during this process to determine and hopefully avoid any potential issues that could come up later in the process.

With a pre-approval, you will be able to narrow the loan options that are best for you.

At the end of this process, your Lender will provide you with a conditional pre-approval letter.

A conditional pre-approval states that provided your financial circumstances do not change, and the home you find is financeable and meets certain conditions, you would be approved for a mortgage.  Your pre-approval letter will be presented by your Agent along with any offer you may write to let the Seller know your offer is strong and that you are a well-qualified buyer. 

So simply stated, getting pre-qualified gives you an idea of what you can afford. A pre-approval gives you the assurance that when you find your dream home, you can afford it, and you are ready to finance and buy it!   


            Let Genisys Credit Union start the mortgage pre-approval process with you, with the help of a dedicated mortgage consultant.  We have a variety of affordable mortgage loan options to help get you financed and into the home of your dreams.


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