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In today’s real estate market, the majority of home sellers require that a pre-qualification letter be included with a potential buyer’s offer on their home. Although a pre-qualification letter does not guarantee a mortgage loan, it let’s the seller know that the buyer has the purchasing power to make a legitimate offer. So before you begin home shopping, make sure you talk to a mortgage loan officer who can assess your current financial situation and provide you with more concrete information about what you can and can’t afford.

And although you may hear the terms “pre-qualified” and “pre-approved” used interchangeably, they are not the same. Here are what those two terms mean.


Getting pre-qualified for a loan is a very easy process. It’s an initial evaluation of your creditworthiness. You provide the lender your approximate income, the amount of debt you’re carrying, and any other important details from your credit history. The lender uses these figures, which have yet to be verified, to calculate how much money you might be eligible to borrow. The lender may provide you with a pre-qualification letter, which has more details about your likelihood of obtaining a loan.

However, all information you provide during pre-qualification is subject to verification by the lender when you submit your actual loan application. There is no guarantee of a mortgage loan, as your financial situation has not been verified.



Pre-approval means that your financial situation has been verified by the lender. It’s more involved than pre-qualification but still relatively simple.

You will have to fill out a mortgage loan application and provide the necessary supporting documentation. The lender will examine your financial situation—your credit report, your employment history, your income—and decide what interest rate to offer and the maximum amount you would be permitted to borrow.

Although pre-approval provides more certainty to a borrower than pre-qualification, it also does not guarantee a mortgage loan. That involves other conditions, such as an assessment of the property you want to purchase or one that you’d like to renovate.

Before you make plans to spend your mortgage loan, make sure you know how much you can expect to borrow. Talk with your lender and get a professional examination of your financial situation.

Article courtesy of Texas Realtors.