Difference between pre-approval and pre-qualification

During the pre-approval process, you’ll fill out a loan application. Then your documentation is sent to processing, which allows your lender to provide you with a conditional written commitment that includes a maximum loan amount. Pre-approval gives you direction on what homes you may be able to afford, as well as how much you should save for a down payment. With this information, you can confidently start shopping for your home. In addition, a pre-approval letter gives a home seller proof that you can purchase their home, so they’ll take your offer more seriously.

The number you get from the pre-approval process tells you the maximum payment amount you can expect to borrow from your lender. However, to understand how that translates to potential homes you can afford, you need to factor in associated costs like closing costs, taxes, insurance, HOA fees, moving expenses and more. Learn more about how much to save before buying a home .


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