Mortgage Pre-Qualification Vs. Preapproval
Find out how much house you can borrow before you start looking – and how you can make the strongest offer possible on the property you choose.
If you’re ready to make your dream of owning a home a reality, you’ve probably already heard that you should consider getting prequalified Footnote[1] or preapproved Footnote[2] for a mortgage. It’s time to understand exactly what each of those terms means and how they might help you. And when you’re working toward a goal this big, you want every advantage.
What is mortgage prequalification?
Prequalification is an early step in your homebuying journey. When you prequalify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check.
Prequalification is also an opportunity to learn about different mortgage options and work with your loan specilaist to identify the right fit for your needs and goals.
What is mortgage preapproval?
Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the bank will verify the information you provide. They’ll also perform a credit check. If you’re preapproved, you’ll receive a preapproval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.
Getting preapproved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home.
How long does prequalification or preapproval take?
Aside from their distinct roles in homebuying, prequalification and preapproval can take different amounts of time. Prequalifying at OneBank is a quick process that can be done online, and you may get results within an hour. For mortgage preapproval, you’ll need to supply more information so the application is likely to take more time. You should receive your preapproval letter within 10 business days after you’ve provided all requested information.
What information do I need to provide?
Prequalification:
- Income information
- Credit check
- Basic information about bank accounts
- Down payment amount and desired mortgage amount
- No tax information required
Preapproval
- Copies of pay stubs that show your most recent 30 days of income
- Credit check
- Bank account numbers or two most recent bank statements
- Down payment amount and desired mortgage amount
- W-2 statements and signed, personal and business tax returns from the past two years
Which is right for me?
First-time homebuyers are more likely to find that getting prequalified is helpful, especially when they are establishing their homebuying budget and want an idea of how much they might be able to borrow.
Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.
Ready to prequalify, get preapproved or apply? Get started with the Digital Mortgage Experience.
Prequalification Vs. Pre-approval Comparison
Prequalification:
- Benefits: You can start house-hunting knowing how much you might be able to borrow
- Process: Provide basic information to the bank and quickly get a prequalification amount
- Documentation:
Preapproval
- Benefits: You’ll be ready to make an offer with confidence—and gain a competitive advantage
- Process: After submitting documentation to the bank, you should receive a decision within 10 business days
- Documentation: Provide proof of financial details, plus a credit check