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Prequalification vs. Preapproval

Mortgage Pre-Qualification and Pre-Approval are two smart homebuying moves - The two are often confused to be the same, but they differ. These are two key steps in the mortgage application process. Some people use the terms interchangeably, but there are important differences that every homebuyer should understand.

Find out how much house you can borrow before you start looking – and how you can make the strongest offer possible on the property you choose. If you’re ready to make your dream of owning a home a reality, you’ve probably already heard that you should consider getting prequalified or preapproved for a mortgage. Pre-qualifying is just the first step. It gives you an idea of how large a loan you'll likely qualify for. Pre-approval is the second step, a conditional commitment to actually grant you the mortgage.

It’s time to understand exactly what each of those terms means and how they might help you. And when you’re working toward a goal this big, you want every advantage. Prequalifying at DCANS Mortgage is a quick process that can be done online, and you may get results within some few hours. For mortgage preapproval, you’ll need to supply more information so the application is likely to take more time. You should receive your preapproval letter within 10 business days after you’ve provided all requested information.

 

TYPE OF INFORMATION NEEDED FOR EACH (DIFFERENCES AND SIMILARITIES)

 The pre-qualification process is based on borrower-submitted data, which will provide a ballpark estimate of how much they can borrow. The pre-qualified amount isn’t a sure thing, because it's based only on information provided. We won't take a close look at a borrower's financial situation and history to determine how much mortgage they can reasonably afford at the pre-qualification stage until we reach the pre-approval stage. Pre-qualification can be done over the phone or online, and there's usually no cost involved. In fact, using our mortgage calculator is an easier way to self pre-qualify oneself without having to contact us.

Preapproval is verified borrower data—for example, a credit check.

 

PRE-QUALIFICATION
Income information
 Credit Check
 Basic information about bank accounts
 Down payment amount and desired mortgage amount
 No tax information required
Not required to fill out a mortgage application form.
Mostly not required to pay any application fees.
Comes with only estimate of loan amount but does not come with specific loan amount and interest rate information.
Pre-qualification is neither pre-approval nor a commitment to lend; you must submit additional information for review and approval.
PRE-APPROVAL
 Most recent 3 months Payslips and 12 months SSNIT Statement
 Credit Check
 Most recent 3 months bank statements
 Down payment amount and desired mortgage amount
 Tax information required. CAGD-generated payslip for public sector workers satisfies tax information requirement. Private Sector Workers will need to provide their income tax statement in addition to the SSNIT Statement. Business Owners must provide a valid Tax Clearance Certificate.
Required to fill out a mortgage application form.
Application fees may apply.
Comes with specific loan amount and interest rate information.
Preapproval is not a commitment to lend; you must submit additional information for review and approval.

 

 

WHICH IS RIGHT FOR ME?

First-time homebuyers are more likely to find that getting prequalified is helpful, especially when they are establishing their homebuying budget and want an idea of how much they might be able to borrow.

Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.

The advantage of completing both steps (pre-qualification and pre-approval) - before looking for a home is that it offers an idea of how much a borrower has to spend. This prevents wasted time looking at properties that are too expensive. Getting pre-approved for a mortgage also speeds up the actual buying process, letting the seller know that the offer is serious in a competitive market.

Both pre-qualification and pre-approval are good in the homebuying process, but one has more weight than the other - Pre-approval carries more weight than Pre-Qualififcation. Getting pre-qualified and pre-approved for a mortgage gives potential homebuyers a good idea in advance of how much house they can afford. But most sellers will be more willing to negotiate with those who are pre-approved. Pre-approval also allows borrowers to close on a home more quickly, offering an edge in a competitive market.

 

 

PRE-QUALIFICATION AND PRE-APPROVAL COMPARISON

 

 
BENEFITS
PROCESS
DOCUMENTATION
PRE-QUALIFICATION
 You can start house-hunting knowing how much you might be able to borrow.
 Provide basic information to a lender and quickly get a prequalification amount.
 Answer questions for this process, plus a credit check
PRE-APPROVAL
 You’ll be ready to make an offer with confidence—and gain a competitive advantage.
 After submitting documentation to a lender, you should receive a decision within 10 business days
 Provide proof of financial details, plus a credit check

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Related Pages

Mortgage Pre-Qualification

Mortgage Pre-Approval

The Homebuying Process

Homebuying Guide

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