Mortgage Pre-Qualification Vs. Pre-Approval. What’s the Difference?

June 10, 2016

Your first time buying a home can be overwhelming as there is much to research and consider. Many question how much home they can afford and face uncertainty as to the loan amount they will be approved for. A great place to begin is by contacting your bank or lender to obtain a mortgage pre-qualification or mortgage pre-approval. Although these terms are often used interchangeably, there are some important differences a first-time home buyer should be aware of in order to choose the option that will work best for them. We’re here to break it down for you and help avoid any confusion.


A pre-qualification is an estimate of the mortgage amount for which you would likely qualify. It is calculated by giving the bank an overall “snapshot” of your finances, including debt, income and a possible down payment amount. Since this amount is based off of information you provide, and not your full credit report, it is not guaranteed. There is no cost involved during the mortgage pre-qualification process and no commitment made by either side. When you formally apply for a loan, you may be approved for a different amount. However, pre-qualification is a great place to start and will guide you toward homes in your price range.


The mortgage pre-approval process requires more time and documentation than the pre-qualification process. During the pre-approval process, the lender will require an application to be completed and documentation to be provided in order to perform an extensive background check and credit search. Some of the items needed include two years of tax returns and W2’s, a month of paystubs and two months of bank statements. Once this is complete and you are approved, you will receive a conditional commitment letter for an exact mortgage amount, as well as, an estimated interest rate. The mortgage pre-approval is not a guarantee on any home as certain requirements will still need to be met such as a satisfactory appraisal, title search and other predetermined conditions. Conditions will be listed in the pre-approval letter and must be met in order to proceed through the mortgage process.

Deciding to go with a pre-qualification or pre-approval really depends on where you are in the home buying process. If you are just “kicking the tires” and exploring options, a pre-qualification is a good way to go. If you are “all in” and doggedly looking for a new home, a mortgage pre-approval is a better option. In addition to definitively answering how much you can afford, it signifies that you are a serious buyer with verified purchasing power. This can provide a bit more negotiating leverage when making an offer on a home.

ENB offers mortgage pre-qualifications. For an in depth mortgage consultation, contact one of our Mortgage Experts!