Should I Get Pre-Qualified or Pre-Approved for a Home Mortgage Loan?

In a posting from last week (see link below), I mentioned that my application for a mortgage loan pre-approval was recently rejected. I also mentioned that it was fairly surprising when the rejection decision came back to me.

My Money Blog – Can Graduate Students Get Approved for a Home Mortgage Loan?

However, what I did not mention was that the reason that I was so surprised was due to the fact that the same lender had pre-qualified me for a loan several weeks prior.

From this experience, I learned that there obviously must be a big difference between getting pre-approved for a loan and getting pre-qualified. But – just what is that difference exactly? The answer to this question and the decision of which to pursue will be the subject of today’s post.

“Mortgages for Dummies” by Eric Tyson does a wonderful job exposing the differences between these two related, but significantly different, processes. If you are interested in learning more about the details of mortgages, I would highly recommend clicking the link below and picking up a cheap, used copy of this useful book on

Mortgages For Dummies, 3rd Edition –

What does it mean to get pre-qualified for a home mortgage loan?
In Tyson’s book, he describes mortgage pre-qualification as, “potentially a waste of your time and money and may even be grossly misleading.” Well, he definitely seemed to hit the nail right on the head with this description, at least as far as I experienced this process.

Loan pre-qualification is essentially a “casual” agreement with the loan officer about approximately how much money they might be able to lend you, after quickly reviewing your financial situation. It is very fast and cheap. It usually only takes 15 minutes or less.

In the pre-qualification process, since the lender does not verify the facts about your financial situation, he/she/it is not bound by any contracts to loan you any of the money for which you get pre-qualified.

This sounds like a waste of time to me…

And, what’s more – the mortgage broker told me that in this day and age, pre-qualification is just as good as pre-approval. Talk about a trustworthy, knowledgeable professional!

What does it mean to get pre-approved for a home mortgage loan?
On the other hand, mortgage pre-approval is a much more serious process. In my mind, it is ALWAYS going to be the way to go in the future. The process involves the following steps be taken by the mortgage lender:

  • Review your credit history/credit report/credit score
  • Analyze your past, present, and future income and expenses
  • Amount of cash, investments, and debt you have
  • Analyze your prospects for future employment.
    • This is where the mortgage lender got stuck with my pre-approval application. They were wanting a note from the university I will be attending this fall to guarantee my continued employment for at least 3 years. I think this is a little ridiculous, but it is what they were wanting.
Obtaining a mortgage pre-approval letter gives you two huge advantages, as a potential home buyer. First, you will know exactly how much money is available to you to buy your home (not just a tentative amount that mortgage lender feels they might be able to lend you). Second, sellers will take you much more seriously when you make an offer, since they know for a fact that you can produce the funds to buy their house in a timely manner.

Keep on learning!


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