Knowing what loans are available to you can help you find the right home—at the right price. You might hear the terms “pre-approval” and “pre-qualification” during your home search. While these terms are often used interchangeably, they have different meanings.

Pre-qualification

Pre-qualification is an estimate of how much you can afford in a mortgage payment. It's based on information provided by you, the borrower. Because pre-qualification doesn't guarantee a loan—it only estimates one—the lender usually doesn't verify the information you provide.

Pre-approval

Pre-approval is a firmer commitment from the mortgage company. The lender will use a credit report to verify monthly payments on installment loans and credit cards, and to check payment history on these loans. During pre-approval, the mortgage company does all the work of a full approval—except for the appraisal and title search.

What it means for you

Keep in mind that neither pre-approval nor pre-qualification guarantee a mortgage. Before agreeing to make a loan, lenders will still need to look at property appraisals, verify information, and possibly re-check credit.

So, why should you get pre-approval? Because obtaining pre-approval at the start of the buying process means you can make an offer on a house quicker—and avoid the headache of not qualifying for a home you have under contract.

Save time! Ask your REALTOR® to help you prepare the pre-approval information lenders usually request.