When To Pre-Qualify, When To Pre-Approve

The terms “pre-qualify” and “pre-approve” sound similar, but they fit at opposite ends of the journey to a loan application.

Pre-qualification should be done early. It’s an informal estimate, without any commitment from a lender, to assess how much you might be able to borrow.

Pre-approval is “just about ready to apply”, typically when you have everything except a purchase contract.  It involves completing a loan application, which lets the lender begin verifying your information.  Successful pre-approval gives you a “pre-approval letter” that confirms the lender’s offer to lend a specific amount.  This letter may be helpful in shopping and negotiating the actual purchase.

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