Are you looking to purchase a home and need to get a mortgage loan? If so, you're likely wondering what the differences are between a mortgage pre-approval and pre-qualification. Here are the key differences between these two things.

Pre-Qualification

A pre-qualification is likely the first step that you will go through, since it is for people interested in buying a home but not ready to buy right away. You will meet with a mortgage lender and tell them all of the relevant financial information that is necessary to get a mortgage. This includes things such as how much money you make, how much you have in savings, your employment history, and your approximate credit score. You do not need to supply any paperwork in order to be pre-qualified, so you can leave tax returns, pay stubs, and W2s at home. The loan officer will process all of that information and tell you know much they think you would be pre-qualified for for one of many home loan purchases. This is not a number that the bank is bound to lend you for a home, but it will let you know what range of homes that you should be looking at.

Pre-Approval

The pre-approval process will involve giving the loan officer all of the necessary paperwork to calculate how large of a loan you will be pre-approved for. They'll run a credit check as well to look into any potential debts that you owe, calculate your loan-to-value ratio, and base the pre-approval loan on that information. Your pre-approval letter can be submitted with any home offers to help make your offer more appealing to sellers. It also means you can safely make an offer and know that your loan will be approved in the end. 

Keep in mind that the pre-approval process will count as a hard inquiry against your credit score, which causes your score to be lowered slightly by having the information pulled. This means that you should ideally get a mortgage pre-approval close to when you are ready to buy a home, because a pre-approval letter is not guaranteed forever. It will typically only be valid for 2-3 months, and after that you would need to submit your information again to get another pre-approval. This will count as a hard inquiry against your credit score, even though all the information was pulled for your first pre-approval.

Speak with a local mortgage lender if you have any questions about the pre-qualification and pre-approval process.