I'm confused, what is the difference between pre-qualification and pre-approval?

Pre-qualification is when your loan officer looks at your application, pay stubs, bank statements, taxes, etc.. and has determined by his experience that he can get you financing. Pre-approval is when all those documents are compiled into a package and submitted to an underwriter, where they will look at every document and scrutinize every detail, and return a pre approval status. Since the mortgage meltdown, very few lenders were doing pre approvals, since they still had to have an underwriter work on your file without charging a fee or the promise that a loan would eventually be delivered.. however, things are changing a bit.. we are starting to see more and more lenders offering pre approvals. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

A pre-qualification is the lender saying that based on the information given to them about income and looking at your credit that you qualify to by a home of X-amount of dollars. A pre-approval means that the lender has put together a full loan file and has actually reviewed your income and asset documentation such as pay stubs, bank statements, retirement account statements, etc., runs the information through an automated underwriting system with Fannie Mae or Freddie Mac and determines that everything provided falls within the loan program's guidelines and should go right through underwriting.A pre-approval carries much more weight with a Realtor and a seller than a pre-qualification. Anyone can get pre-qualified over the phone because it's just a "based on what I am told you can get a loan for X-amount." situation.

Excellent answers given by other forum members.

Simple... Pre-QUALIFY is basically a lender has taken a partial or full application and maybe looked at credit and can say "It looks like it SHOULD BE OK". Pre-APPROVAL is when they take it the next step of actually collect W2's, pay stubs, banks statements, etc., VERIFY everything, and can tell you FOR SURE that is IS OK. www.MortgagesUnlimited.biz

Pre-approval is generally a stronger piece when it comes to buying a house. It's generally based on a few items like credit score, area of the house and the type of loan. Pre-qualification is generally a more generic "you can afford this much." Pre-approval is better when negotiating usually.

hi Israel if you would like the seller and seller's agent (realtor) to accept your offer seriously, I recommend that the loan officer pulls your credit, verify your income docs, 2 yrs of tax return as a pre-approval process. By following this, you are showing seriousness to the sellers and better chance for u to receive a ratified contract. I as a loan officer have always proceeded with this method and also once I receive your income docs, run your information through our automated underwriting system and provide the "Conditional Approval" to the realtor pending appraisal and title work to the property u are interested. Hope this helps. Mike (703) 505 5300 lending nationwide as a Bank.

Nothing.

As you see from other answers, what it means varyies from lender to lender. In general, pre-qualifying you is less strong than pre-approval and may not include actually reviewing your credit. Sometimes pre-approval does not include a full application which has been approved by the underwriter, but it is someplace inbetween. If an underwriter has approved your application subject to finding a property, I would call that a full approval with conditions, or a conditional approval. Most Realtors and sellers want to know that a buyer's credit has been reviewed, and that they have the income and assets to support the purchase. That is easier to do in some cases than others. If someone has a more complicated situation, such as being self employed or commission income, I personally will not issue a pre-approval without extensive documentation of their qualifications and sometimes wanting underwriter review of a full application to make sure there are not any problems after the contract is signed. One of the worst experiences for everyone involved is a signed contract where the buyer can't get their loan approved.

Pre-qualify is more of an estimate from the lender that based on your credit score and other factors you will be able to qualify for the loan. When you are pre-approved the lender has actually taken all of the required documentation and determined that you are eligible for the loan.