Prequalification Vs. Preapproval
What’s the difference between prequalification and preapproval for a loan?
When applying for financing, it is important to know the difference between prequalification and preapproval. Prequalification is based on your self-reported information. The lender typically asks about some basic financial information to give a general estimate of how much you will be approved for and can afford. It is common for a prequalification to be based only on what is self-reported rather than from a credit report. Because it is based on an estimate, it is less reliable than a preapproval. A preapproval involves checking your credit score, reviewing bank statements, and other financial documents.
In a very competitive market, it is especially important to present a strong offer when competing for a home. A preapproval letter from your lender is much stronger and will show a seller that your financial information has been verified.
Here is a graphic from Mint that shows the basic differences between prequalification and preapproval.
To learn more about the differences between preapproval and prequalification, read this informative article from Mint or reach out and I’d be happy to answer your questions!