Getting prequalified or preapproved for your home mortgage before you house hunt is a great idea – it helps you narrow your search to looking at only the houses that you know are in your budget according to your bank. But are “prequalified” and “preapproved” the same thing? Although some creditors may use the terms interchangeably, there are differences between the two that are helpful to know when considering a new home purchase.
Both terms mean that a creditor is doing an assessment on your creditworthiness as a mortgage holder. Prequalification usually refers to a less rigorous process – meaning your bank is doing a simple review of your credit and will ask basic information about your income, housing payment and savings. Once you’re prequalified, you can choose to move forward and go through the preapproval process.
Preapproval can be a more involved process that typically means you will be sharing financial and personal information that may require submitting proof of income, bank statements, tax returns and your agreement to a credit check. Once you’re preapproved, the bank may give you a preapproval letter that is good for several months – the duration of your house hunt.