Prequalification is how lenders determine if you fit the basic financial criteria for a home loan. To get prequalified, you tell a lender some basic information about your credit, debt, income, and assets, and they tell you how much you may be able to borrow.
Mortgage prequalification is an informal evaluation of your creditworthiness and how much home you can afford. Prequalification indicates whether you meet minimum requirements for a loan and how big that loan may be. Prequalification is an important step for those who aren’t sure whether they’re financially ready for homeownership.
Unlike pre-qualification, pre-approval requires proof of your debt, income, assets, credit score and history.To get pre-approved, you’ll supply documentation such as pay stubs, tax records and proof of assets. Once the lender verifies your financial information, which may take a few days, it should supply a pre-approval letter you can show a real estate agent or seller to prove you’re ready and able to purchase a home.
Remember, pre-qualification doesn’t guarantee pre-approval. You can still be turned down if your financial documents don’t support the numbers you reported.