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thumbs upIf you are considering purchasing your first property, you have likely heard the terms pre-qualification and pre-approval. You may have even heard them discussed interchangeably. While they are similar (they both play a large part in understanding how much you qualify for), they are also very different as one holds more weight than the other.


Pre-qualification should be the first step you take once you have decided to purchase a property. Getting pre-qualified helps you understand how much you can afford, allows you to discuss your goals with your lender, and initiates the discussion on the various loan types (and what options you may have).

Pre-qualification requires you to provide the bank an overview of your financial position which includes your income, debts and any assets you may have. The lender will use the information that you provided to calculate the amount that you qualify for as well as the rates and loan packages that are available. When getting pre-qualified, you are only providing the information over the phone and are not providing any supporting documentation or authorizing the lender the pull your credit. You must be careful though, as a pre-qualification is only as accurate as the information that you provide the lender.

Getting pre-qualified is also a great, risk free way to compare lenders because they don’t pull credit as part of a pre-qualification but can provide you with rates and loan options which will allow you to compare companies.

Pre-qualification is also great if you are trying to understand or improve your position as a buyer. Let’s say, for example, you are working on improving your debt to income ratio and your credit to improve your buying position. Getting pre-qualified periodically can help you track your progress. Additionally, a good lender will have a credit specialist on staff that can help guide you and provide the fastest ways to improve your position/reach your goals!

Benefits of a pre-approval

  • Great starting point
  • Quick (can be done in 20 minutes over the phone)
  • Risk-free
  • Allows you to shop lenders
  • Allows you to understand your financial position


Pre-approval is typically the second step in the mortgage process. Pre-approval consists of a thorough investigation of your financial position which includes income, debts, assets, credit history, etc. The lender will require you to provide proof of the information that you provided during the pre-qualification process (i.e. supporting documentation, pay stubs, tax records, etc) prior to issuing a pre-approval letter. During a pre-approval it is common for the lender to require you fill out a formal mortgage application. If you are prepared with all of the required documentation, you can get pre-approved in as little as one day.

The best time to get pre-approved is after you have selected the lender you plan to get your mortgage with and when you are ready to buy within the next 90 days (pre-approvals are typically only good for 90 days but can easily be renewed). Once you have been pre-approved, the lender will provide you with a pre-approval letter that will be presented with any offers that you submit.

Getting pre-approved is better for both the buyer and the seller in a transaction. Pre-approval protects the buyer as it is a strong indication from the bank that, assuming you don’t have any major financial changes, you will be approved for a mortgage. Pre-approval is great for the seller as it is a strong indication that the mortgage will close, and that the buyer is ready, willing and able.

Benefits of pre-approval

  • It is quick, if you are prepared
  • It tells the seller you are a serious buyer
  • It protects you, as the buyer, from putting down a deposit on a property you may not be approved for
  • It allows you to move on properties more quickly (since you are prepared to submit the pre-approval letter with your offer)
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  1. […] and you now know the key differences between the two, but if you’d like to know more about whether pre-qualification or pre-approval is better for you, then simply follow the link to the article mentioned […]

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