What is the Difference between Prequalification and Preapproval

Prequalification is a lender’s estimate of how much you could borrow based on the information you provide. This information would include income, debt, credit score, as well as other things. None of the information you give is verified by the lender. Prequalification is usually free.

Because there is no verification of facts, and the lender is just making an estimate.  I would say that a prequalification doesn’t really hold any weight. Does everybody know that, probably not. You might be able to interest an agent or seller with only being prequalified. Would most people give false information at their prequalification, probably not, but the fact that they could makes these very unreliable in my opinion.

Preapproval means that a lender has evaluated your creditworthiness and has made a commitment to extend you a loan up to a specified amount. There is typically a specified amount of time the preapproval is valid for. Being preapproved however does not mean that the money will definitely be given to you when you decide on your property. The lender will send out an appraiser to make sure you are not overpaying for the property. As long as the home appraises at or above the purchase price the funds should be provided.

Agents and sellers will take you much more seriously if you are preapproved. You have proven you are serious by going to the lender and getting preapproved in advance. The sellers and their agent know that the information they are getting is reliable, who wouldn’t want that? I have another piece on the benefits of being preapproved.