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If you’re shopping for a mortgage, you’ve likely heard the terms “prequalification” and “preapproval”, and are wondering how they differ. They are both actions a lender takes to determine how much money is appropriate to lend you. The difference lies in how closely your finances are examined to determine that figure. 

Key Takeaways:

  • A Prequalification consists of a basic check of your finances, and is not confirmed by a credit check.
  • A Preapproval consists of a thorough inspection of your finances, where documents like tax returns and W2s are submitted, and a credit check is performed.
  • Remember you may prequalify or be preapproved to borrow more house than you can actually afford

The excitement of wanting to buy a home sometimes drives people to online home-listing sites, or a real estate agent before going to their credit union. 
However, you may want to contact your credit union (or chosen lender) before you start looking at homes, so that you can get prequalified or preapproved. It’s also worth noting that securing your mortgage through a credit union as opposed to a bank may offer additional benefits, such as: more personalized service, lower rates, fewer fees, an easier approval process, and working with a loan officer who will advocate for you. 


To get prequalified, the lender conducts a basic overview of your finances: how much money you make, how much you owe on credit cards, car loans, student loans, and any other debt you may have. All of this information is self-reported, and there’s no credit check to verify it. The goal is to see if there are any red flags that would prevent you from qualifying for a mortgage.


A preapproval is very similar, except the lender takes the time to verify the information you provided. You’ll need copies of previous years tax returns, W2’s and recent paystubs to verify your income, and a credit check will be run to verify your existing debts. 
Again, being prequalified or preapproved does not guarantee you will get a loan. It only indicates that if the information you submitted is accurate and remains the same, there is a high probability that you will receive a loan within the financial range discussed when you actually apply.

What A Preapproval or Prequalification Letter Means To Sellers

Depending on your lender and the information you’ve provided, you may receive a prequalification or a preapproval letter. This tells real estate agents and sellers that you’re a serious homebuyer since you’ve begun working with a lender to secure a mortgage for your future home.
The difference between verified information (preapproval) and unverified information (prequalification) has some importance. It speaks to how serious you are about buying a home, and the effort you’ve put into the process of securing a mortgage to do so.
A homebuyer can make an offer to buy a home without ever having spoken to a lender. A seller is likely to reject this type of offer if they’re in a competitive market, or especially if they have other offers from buyers who have been preapproved.

Points To Remember

It’s important to note that prequalification and preapproval letters are typically only valid for 90 days, and are not a guarantee you’ll get a loan. Your application will still need to go through processing and underwriting before you can set a date to officially close on your mortgage. You can read about The 5 Steps Of The Mortgage Process if these terms are unfamiliar to you.
Remember, you may prequalify or be preapproved to borrow more than you can afford. Make sure you evaluate your finances to know how much you can comfortably spend on your mortgage payment, so you look at homes that are priced accordingly.

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Contact your credit union mortgage loan officer to learn more about getting a mortgage

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