Getting Prequalified vs. Preapproved

If you’re actively searching for a house, you’ve probably heard about the processes of “getting prequalified” and “getting preapproved."  

These terms are sometimes mistakenly used interchangeably. While they are similar – both give you an idea of the price you can afford to pay for a home – there are important differences to be aware of as you start planning to purchase a home. 

Prequalification:

 (A lender’s brief assessment to give you a general idea of how much mortgage you can afford.)

• No credit pull
• No in-depth analysis of your finances
• Quick process
• Not as valuable to sellers

Preapproval:

(A lender’s in-depth evaluation of your finances to determine how much mortgage they will likely grant you.)

• Requires financial documentation
• Completion of the mortgage application
• Hard credit pull(the potential lender reviews your credit)
• Valid for a set time period(usually 120 days)
• Signals to sellers you’re serious about buying

Prequalification can be used as a handy estimate when you begin your house search:

You’ll know with greater certainty what your budget is and what range of home prices are appropriate for you. 

Preapproval is more helpful when you enter the serious stage of homebuying:

Preapproval usually includes completing a mortgage application and providing documentation of your income, debts and credit history.  

To get preapproved you’ll need to provide this information for yourself and anyone you are purchasing a home with: 

• W-2s 
• Recent paystubs 
• Proof of any additional income 
• Account statements  
• Tax returns

In addition, the lender usually does a hard credit pull, meaning a credit inquiry is made and noted on your credit history. 

Getting preapproved is the more involved process, but it’s still relatively quick and simple, especially when you can do it entirely online like at UW Credit Union. 

Once you’re preapproved, you’ll have a more accurate understanding of what your budget is and will have more negotiating power as a buyer.  

Ready to buy? Get in touch with our local mortgage lending experts or get preapproved. 

Still researching? Explore our Mortgage Learning Center.