Mortgage Terms are often confusing! Pre-Qualification, Pre-Approval, Approval, what does it all mean?

There are different stages of the approval process when you apply for a mortgage and it’s important that you know the difference between the terms and what they all mean.

The first is Pre-Qualification: This is where your bank or mortgage lender looks at your total income and debt to give you a rough idea of how much money you may qualify for. You could have a rate hold put in place for up to 120 days. Several conditions will be attached, and final approval is far from a guarantee at this stage. Most banks offer this style of a pre-qualification.  

The second is a fully underwritten Pre-Approval: Your application in this process is much more thoroughly reviewed. A credit check would be pulled, basic income documentation is requested and verified. Your application is sent through to several underwriters at different lending institutions to be reviewed and formally “pre-approved”. Once again, a rate hold of up to 120 days is provided. A pre-approval is not a 100% guarantee of being approved since final approval will only be granted on a specific property being purchased and upon an updated credit check to confirm debt load has not changed and updated income verification at time of final approval.  ****(Our office only provides fully underwritten pre-approvals as this is the best option for homebuyers)

**rate hold: the length of time a lender will hold an interest rate once it has been locked in, typically between 90-120 days

Benefits of Pre-Qualification and Pre-Approval

Getting pre-approved is a much better option and a very important step when looking for a mortgage for a few reasons:

1. It allows you to lock in an interest rate, especially with changing markets.
2. It provides additional security in knowing that you meet the initial requirements.
3. For homebuyers, with a mortgage pre-approval in your pocket, you’re letting the seller know that you’re a serious buyer giving you an advantage. (My office handles pre-approvals so thoroughly that we will provide a certificate guaranteeing approval that can be provided to your real estate professional and shared with sellers when presenting an offer)
4. You know exactly what you can afford when you’re buying a home

Final stage is the Approval: This occurs once an offer to purchase a property has been submitted and accepted by the sellers. Final approval is granted for the purchase of a specific home and an appraisal may be required to confirm value.


Know and understand the difference in these terms to avoid a disastrous situation. Get pre-approved, not pre-qualified!

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