What Does It Mean to Be Preapproved vs. Prequalified?

Both are important steps when securing a loan

Sponsored by What's this?
Woman reviewing her private mortgage insurance costs on statement
Photo: Jose Luis Pelaez Inc / Getty Images

Lenders often use the words “preapproved” and “prequalified” when talking about their lending processes for loans like mortgages. While they may sound similar, the two terms are actually quite different. 

Prequalification comes first, and it’s usually a simpler, faster process than preapproval. The lender will ask you for basic financial information and quickly assess whether you might be a good candidate for a mortgage loan, personal loan, or event a credit card. Preapproval, on the other hand, requires a more thorough look at your financial situation. The lender will pull your credit report and give you a firm confirmation of the loan amount you can qualify for.

Both processes can give you an idea of your loan prospects, as well as what you might be able to afford. The key difference is that a preapproval requires lender verification and is essentially a commitment to underwriting the loan (though definitely not a final approval just yet).

What Does Prequalified Mean?

For most lenders, getting prequalified is the first step toward a loan or line of credit. You’ll need to answer a few questions about your income, assets, debts, credit, and/or projected home purchase, and if you appear to meet the lender’s basic qualification standards, they’ll give you an estimate of how much you can afford. Since you don’t need to submit any documents, you can usually complete this process over the phone or via an online form.

The main point to emphasize here is that the lender is basing their prequalification on the information you provide. They’re not verifying your income or pulling your credit, which means your credit score won’t be affected. That all comes later, as part of the preapproval process.


Take your prequalified loan amount with a grain of salt. Since the lender hasn’t verified your income or credit score, there’s a good chance it could change.

What Does Preapproved Mean?

Preapproval is a much more comprehensive evaluation of your financial standing. The lender will pull your credit report, and you’ll need to provide proof of income, such as W-2 forms and pay stubs, as well as documentation of other financial assets.

Assuming you meet the lender’s eligibility requirements, you’ll get what’s known as a “preapproval letter.” A mortgage preapproval letter is often good for 90 days. After that, the lender may need to pull your credit report again. The letter should state how much you can borrow, and in many cases, the interest rate you can expect. 


Though you may be preapproved for a certain loan amount, be careful about maxing out your budget. Use a reliable calculator to gauge what you can truly afford month-to-month.

If you’re looking to buy a home, you can use the preapproval letter to help guide your search. Consider including it in any purchase offers you submit as well. Sellers are often more confident in a bid when they see that a buyer is preapproved. In some cases, it may even help you win out over other buyers.

Prequalified vs. Preapproved

Prequalified Preapproved
Brief assessment of your finances Thorough assessment of your finances 
You provide the information, online or verbally Credit and income information is verified by documentation
Loan amount can change Loan amount is more reliable

After Getting Preapproved for a Mortgage

Once you’re preapproved, you can start shopping for a home, if you haven’t already. When you’ve found a property and the seller has accepted your offer, you may need to provide additional documentation to finalize your loan application. Your loan will then move through processing, and then underwriting, which is the final verification of your financial details against the eligibility requirements of the loan. If all goes well, you could be scheduled for closing in just a few weeks.


Keep a tight rein on your finances after being preapproved. Stay up to date on your bills, avoid opening new credit cards or loans, and steer clear of racking up additional debt in the weeks leading up to your closing. You may also want to avoid changing jobs until your loan is finalized.

Preapproved vs. Prequalified: The Bottom Line

Both prequalification and preapproval are important steps in the borrowing or home buying process, but they’re not one and the same. While getting prequalified can give you a rough idea of what your loan options might look like, it’s not a commitment from a lender by any means. Preapproval will give you a solid idea of what you can afford as a borrower.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Navy Federal Credit Union. "Mortgage Preapproval."

Related Articles