The Difference Between Pre-Qualification & Pre-Approval

Why These Terms Are Different

Although the terms Pre-Qualification and Pre-Approval are often used interchangeably, the two differ greatly in the process involved in obtaining them and in the benefits they provide. Here’s what you need to know about each of these terms:


Loan Pre-Qualification:

This is a lender’s informal way of estimating how much you may be able to borrow. It is based on the information you provide, often by phone, none of which needs to be verified or documented. Since a letter of pre-qualification gives you an idea of how much house and the amount of mortgage payments you can afford, the best time to get pre-qualified is as soon as you decide you want to buy a home.

You supply to the lender unverified information about your income, assets, debts, and possible amount of a down payment. There is no cost involved in obtaining pre-qualification, and there is no commitment for either party. Understand, however, that a letter of pre-qualification does not mean you will get a loan; it is simply a ballpark figure of the amount you can afford to spend on your home and an indication that you might qualify for a mortgage in that amount.


Loan Pre-Approval:

This designation is a firmer commitment on the part of the lender and requires a more detailed and formal process which includes a credit check and employment verification. You will need to provide W2’s, pay stubs, tax returns if you are self-employed, and bank and investment statements to verify your assets.

While this process is more detailed and complex, it is definitely worth your time and effort! Not only does it allow you to shop for Jersey Shore homes with more financial confidence, pre-approval also shortens the actual loan application process and often allows for quicker settlement. In addition, sellers appreciate the fact that pre-approved house hunters are serious about buying their property and that financing should not be a problem. This was shared by a East Coast Broker and Lending Firm.


We breakdown the basic differences between pre-qualification and pre-approval below:

Loan Pre-qualification:

  1. Informal collection of data
  1. No documentation required
  1. Verification not done by lender
  1. An estimate of the amount you might be able to borrow.
  1. Not an entitlement to a loan; simply the first step in the home buying process.


Loan Pre-approval:

  1. Comprehensive collection of data
  1. Documentation required
  1. Verification is done by lender
  1. Certification of how much money the lender would most likely be willing to loan you
  1. Not an absolute guarantee of financing. Funding won’t be given until after the property appraisal, title search, and any other items needing verification have been completed.

The best way to understand how we can potentially help you with your your private money loan is to give us a call. We can discuss your specific home buying needs and we offer personalized service and pricing. Call us today at 707-315-1119, or fill out our borrower form or contact form to learn more about our California private money loans and what California Private Money Lenders can do for you.

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