When you're in the market for a mortgage, you’ll likely encounter the terms "pre-qualification" and "pre-approval." While they may seem similar, these steps are distinct, and understanding the difference can help you navigate the home-buying process more effectively.

Pre-Qualification

Pre-qualification is an informal assessment of your financial situation, estimating how much you can borrow. It’s a quick process, often involving a soft credit pull, and is used to help you understand your budget and mortgage options. However, it’s not a guarantee of loan approval.

Pre-Approval

Pre-approval is a more formal process where a lender evaluates your financial documents and conducts a hard credit pull. It results in a specific loan amount you’re approved for, which can be used to make a serious offer on a home. Pre-approval shows sellers you are a committed buyer with financing in place.