What’s the Difference Between a Pre-Qualification and Pre-Approval?
Put simply, a pre-qualification is a more informal version of a pre-approval. More specifically, a pre-qualification (pre-qual) occurs after a mortgage broker or loan officer analyzes the creditworthiness of a home buyer by asking them a series of questions regarding income, available assets, credit scores and debt loads. In about 20 minutes, the mortgage broker or loan officer should be able to determine the maximum purchase price and monthly payments that the home buyer could qualify for. Once the pre-qual is completed, the next step is the formal pre-approval, which is what the realtor will submit with an offer to purchase a home. During the pre-approval process, the mortgage broker or loan officer will ask for documentation that supports the items asked for in the pre-qual process, such as:
- Complete federal tax returns (2 years)
- W-2s (2 years)
- Complete bank statements (2 months)
- Copy of driver’s license
- Authorization to run credit
The pre-approval process typically takes about 2 days and once completed, a more accurate assessment of affordability and payments can be generated.