Pre-qualifying is a process whereby a mortgage professional informally determines the maximum amount an individual is eligible to borrow.
The mortgage advisor typically:
- Reviews the borrower’s application and credit
- Calculates the debt ratios
- Confirms the borrower meets the chosen lender’s guidelines
- Provides an informal list of financing conditions
- Provides a rate hold for 90-180 days (this is optional)
A pre-qualification is different from a pre-approval.
A pre-qualification is quicker and the lender itself does not review the borrower’s application.
With a pre-approval, the lender provides a rate guarantee on the assumption that the borrower meets its guidelines. The lender will often (but not always) review the application—in part or in full.
In addition, pre-approvals sometimes involve a more thorough check of the borrower’s credit and documentation (by the mortgage advisor, not the lender).
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Last modified: October 2, 2010
