Pre-qualified vs. pre-approved: what's the difference?
Michael Allen, Associate Broker
· 2 min read
Short answer
A pre-qualification is a quick estimate based on what you tell a lender. A pre-approval means the lender has actually checked your credit, income and assets and is willing to put a loan amount in writing. In Metro Detroit, sellers expect a pre-approval letter with your offer. Most letters are good for about 60 to 90 days before the lender refreshes them.
The words sound almost the same, which is why people mix them up. To a seller, though, they mean very different things.
Pre-qualified
You share your income, debts and savings with a lender, maybe online, and they give you a ballpark of what you could borrow. Nothing is verified. It's useful for a first look at your budget, and that's about it.
Pre-approved
The lender pulls your credit and looks at real documents: pay stubs, W-2s or tax returns, bank statements. Then they issue a letter saying you're approved to borrow up to a certain amount, subject to the home appraising and a few final checks. That letter is what goes with your offer.
When I present an offer to a listing agent, one of the first things they ask is who the lender is and whether the buyer is pre-approved. A solid pre-approval from a responsive local lender can win over a slightly higher offer with a shaky one.
How long does it last?
Most pre-approval letters are dated and lenders typically refresh them every 60 to 90 days, since your credit and finances can change. If you've been looking a while, ask your lender for an updated letter before you write an offer.
Will shopping lenders hurt my credit?
Credit scoring models generally treat several mortgage inquiries within a short window as a single inquiry, because they know you're comparing rates. Shopping two or three lenders is smart. Just do it in a tight time frame.
Don't do these things until after closing
- Buy a car or open new credit cards.
- Change jobs, if you can help it.
- Move large amounts of money around without a paper trail.
- Co-sign for anyone.
- Miss a payment on anything.
Lenders check again right before closing. I've seen a new truck in the driveway turn into a very stressful week.
What to bring to the lender
- Recent pay stubs and two years of W-2s (or tax returns if you're self employed)
- Two months of bank statements
- ID
- Info on any other properties you own, debts or child support obligations
Then start looking
With a pre-approval in hand you know your number and you're ready to move when the right house comes up. Search homes in your price range, save searches to get new listings by email, and check out our posts on down payments and closing costs so you know what cash you'll need.
Quick questions
Is pre-qualification the same as pre-approval?
No. Pre-qualification is an estimate based on what you tell a lender. Pre-approval means the lender verified your credit, income and assets.
How long is a mortgage pre-approval good for?
Usually about 60 to 90 days, depending on the lender. After that they'll update your documents and issue a new letter.
Do I need a pre-approval to make an offer in Michigan?
It isn't legally required, but sellers and listing agents expect one, and an offer without it is much weaker.
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