Mortgage Prequalification vs. Preapproval: What Is the Difference?

Prequalification and preapproval are often confused, but they are very different. Prequalification is a casual estimate. Preapproval is a formal lender review that carries real weight with sellers.

Prequalification

Prequalification is an informal estimate of how much you might borrow, based on self-reported information without a credit check. It takes minutes and gives you a rough budget. It is useful for early planning but carries no weight with sellers.

Preapproval

Preapproval is a formal process where the lender verifies your credit, income, assets, and debts. It results in a letter stating the maximum loan amount you qualify for, subject to a property appraisal. Sellers require a preapproval letter to accept an offer.

What You Need for Preapproval

• •Government-issued ID
• •Social Security number (for credit check)
• •Recent pay stubs (30 days)
• •W-2s or 1099s (2 years)
• •Tax returns (2 years)
• •Bank statements (2 to 3 months)

How Long Preapproval Lasts

Preapproval is typically valid for 60 to 90 days. If you have not found a home by then, the lender may need to re-pull your credit and update documents.

Why It Matters

In a competitive market, a preapproval letter can make the difference between your offer being accepted or rejected. Sellers want to know the buyer can actually close. Prequalification does not provide that assurance.

Key Takeaways

• •Prequalification is a quick, informal estimate — no credit check
• •Preapproval is a formal lender review with a credit check
• •Sellers require a preapproval letter to accept an offer
• •Get preapproved before you start house hunting
• •Read our Mortgage Pre-Approval guide for details