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Mortgage Prequalification Verses Preapproval – What is the Difference?

Before purchasing a home you will want to know that you can actually afford it. Agents and sellers will

also want to know that you are fully committed to purchasing their property as opposed to just


The above is a concern for agents as of course they only get commission if the sale proceeds,

therefore for this reason, most estate agents will demand that you get pre-approved before they even

begin showing you prospective properties. Most agents have a mortgage contact within the company

that they usually will refer you to prior to beginning the search of a property. A tip however that we

would suggest is to shop around with other banks and brokers to ensure you get the lowest mortgage

rate possible.

What is a Pre-Qualification?

This is when a simple quick check is carried out to see what you can afford based on your income,

debt, assets, employment history, and perceived credit score. However this won’t carry much weight

with the agent. You can liken it to running a few numbers to see where you stand, but it cannot be

used in place of a pre-approval.

What is a Pre-Approval?

A pre-approval, on the other hand, actually has authority as this comes direct from the lender. It’s a

written, conditional commitment from a bank that says you are pre-approved for the mortgage.

However the pre-approval stage can only arise once the prospective purchaser has verified their

financial details.

Therefore acquiring a pre-approval from your lender will be good evidence to show your agents that

you are a serious purchaser and that you can actually afford it.

However you must act quickly with regards to informing your agent as the pre-approval letter from

your lender is typically only valid for 60-90 days. However agents are aware that things can change in

this period so although they are deemed to have authority agents are fully aware of their fluctuating


It is important to note that you do not need a pre-approval letter to make an offer on a property.

However due to there being so few properties on the market, and so many bid wars, it’s suggested to

to hold pre-approved document as the agent is more likely to put you forward to their sellers you are a

serious buyer.

From the above you can see that being pre-approved and pre-qualified are not the same thing.

To summarize the differences between pre-qualification and pre-approval

Pre-Qualification Pre-Approval

Less robust

Based on evidence provided by the buyer

         Based on verified information

         Must complete an actual loan application

Does not require a credit search Does do a credit search

Not taken serious with regards to being an

authority document.


Shows sellers or agents that you are a serious


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