Is there a difference between Mortgage Pre-Qualification and Mortgage Pre-Approval?
These terms appear to be similar, but can be quite different. Not only do they cause confusion for home buyers, there seems to be many interpretations from those in the real estate and mortgage industry as well.
The difference is in documentation and verification. In other words, is the buyer providing copies of income pay-stubs and bank account statements to the Mortgage Lender or is the Mortgage Lender simply relying on verbal information provided by the buyer?
More often than not, the difference between the two terms is that one is issued without any verification of information and the other starts with the buyer providing written documentation of all information provided. While neither is a considered to be a mortgage commitment, nor a written mortgage guarantee, obtaining a Mortgage Pre-Approval letter is more preferred than obtaining a Mortgage Pre-Qualification letter.
Mortgage Pre-Qualification can be described as an estimate of potential mortgage ability and purchasing power, subject to verification of the information obtained, while Mortgage Pre-Approval requires a more thorough evaluation and review of a buyer’s income, assets and liabilities and is more reliable in determining a buyer’s ability to obtain mortgage financing.