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Pre-Qualification vs. Pre-Approval — What is the difference, and which is better?

June 1, 2023

Pre Qualification vs Pre Approval

Many agents and lenders use the terms pre-qualification and pre-approval loosely. Sometimes when a customer gets approved, the lender or bank issues a pre-qualification, but other times they issue a pre-approval. So, what is the difference?

Technically, there are many differences. A pre-qualification is based solely on the information a borrower submits to a lender—this data is not verified. A pre-approval, on the other hand, is issued based on verified documentation.


When a pre-qual is issued, the lender generates the pre-qualification letter based on what the customer states on the loan application—employment, salary, funds available for a down payment and closing cost, etc. There is no documentation to confirm this information—the lender is simply taking the borrower’s word for it. Sounds a little scary right? Well, it is. Many online lenders and banks issue pre-qualification letters when a customer applies, and if the information is not accurate, they say well, this is what the customer told me. This is a popular advertising approach you’ll see on TV and social media to draw in unknowing customers.

Many listing agents will not even accept a pre-qualification when an applicant submits an offer for a house. They stand by the fact that a pre-qual does not tell them or their seller that the buyer is actually qualified to get the loan. When the market is as hot as it is, you want every opportunity to get your client’s offer accepted.


A pre-approval is the strongest approval that can be issued. When a pre-approval is given, the lender will not only verify the information the customer submits on the loan application, but they will also double-check it, verify all their assets with the bank to make sure they are available at the time of closing, review their credit, and review their job history. These are all critical things necessary to close a loan properly. As many as 3 out of 10 loans never close. This is an alarming number, and it’s due to the fact that some lenders do not properly issue a pre-approval for a customer from the very beginning.

Work with a lender that knows and understands the difference.

At Homestead Financial Mortgage, we are not only confident in our pre-approval process, but in many cases, we can offer our Fast Track closing. Our Fast Track program allows the customer to close in as little as 14 business days. This may sound impossible, but we do it! We take the time upfront to gather and confirm the information and documentation needed to get a customer approved for the home they want. We will even contact the listing agent and speak with them to reassure all parties that the buyer is ready to close on their dream home.

Homestead Financial Mortgage has been in business for over 20 years, and we are growing and going strong. We are proud to be the preferred choice of many agents because of how we do business. We don’t believe in wasting anyone’s time by issuing pre-approvals that don’t close.

Reach out to one of our Loan Advisors for more details. We are happy to answer any questions and provide peace of mind in this turbulent homebuying market.

"By being open and recognizing our strengths and weaknesses, we can see opportunities for growth and ways to help each other."

- CEO, Jayson Hardie on Growth

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