Mortgage preapproval vs. prequalification

Couple looking to purchase a home discussing the difference between mortgage prequalification and mortgage preapproval

One of the most important factors to consider when buying a property is understanding how much home you can afford.

If you intend to finance a new home with a mortgage, you may want to find out how much money you can borrow from a lender. You’ll also want to figure out what monthly payment amount is comfortable for you within your overall budget. Mortgage prequalification and mortgage preapproval can help you determine what a lender may loan you so you can plan your financial future.

What is mortgage prequalification?

Getting a mortgage prequalification may be a good first step if you decide to go down the mortgage route and want a general idea of your borrowing power. This process normally involves telling a lender about your assets, income, and other financial details. The lender will then provide an estimate of how much loan they may give you based on your circumstances.

This estimate is not a guarantee of mortgage approval or the loan amount you'll receive. In fact, you haven’t even submitted an official mortgage application yet. Think of prequalification as the loan amount you may qualify for if you formally apply for a mortgage with a lender.

Prequalification is often a quick process. You may be able to get prequalified over the phone or online in minutes.

Prequalification to buy a new home

A general estimate of how much you may be able to borrow from a mortgage lender
Prequalification may only take a few minutes
Your financial information is not usually verified by the lender
Your credit report is not usually checked by the lender

What is mortgage preapproval?

Mortgage preapproval is typically a more thorough process than mortgage prequalification. It usually involves submitting a mortgage application to a lender and providing them with documentation that verifies your income, assets, employment, and other financial details. The lender may also pull your credit file to assess your "creditworthiness" — how likely you are to make repayments on a mortgage.

If you are preapproved for a mortgage, the lender may be willing to lend you money subject to conditions such as an appraisal of the home you choose to buy and further verification of your financial information. However, mortgage approval is still not guaranteed.

Getting preapproved by a lender may give you an advantage when buying a home because it shows you have completed most of the steps for securing a mortgage. When you find a house you want, you could be in a position to make a quick offer as your financing may be closer to finalized.

Some real estate agents only work with preapproved homebuyers because they may be able to put in an offer on a property quickly, which could speed up the homebuying process.

Preapproval to buy a new home

Often a conditional commitment from a lender to give you money
May take more time to complete than prequalification
Your financial information is usually verified by the lender
Your credit report is usually checked by the lender

What to expect

For prequalification and preapproval, lenders typically ask for details such as your contact information, income, employment details, and what type of home you’re looking for.

Lenders may also want to determine your debt-to-income (DTI) ratio, the percentage of your gross monthly income that goes toward paying off your monthly debt. They may also pinpoint your potential loan-to-value (LTV) ratio, the percentage of the total value of the property you want to purchase that represents your home loan amount. Also, be prepared to tell your lender about any down payment you may be planning to make.

Your credit report isn’t usually checked during prequalification, so this process is unlikely to affect your credit score. For preapproval, the lender may obtain your credit report and ask you for financial documents such as tax returns, pay stubs, W-2s, and bank statements. This is usually a more in-depth investigation of your finances, so it may take longer than prequalification.

Please note: Discover® Home Loans does not offer purchase mortgages, or prequalification or preapproval.

Main: The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.

Tap into your equity today

Get the funds you need for home improvements, debt consolidation, or life's next big adventure.

Check Rates

Main: Start your application online or give us a call.

Get Started

Phone-icon1-855-361-3435

Weekdays 8am–Midnight ET
Weekends 10am–6pm ET

Discover Home Loans Restrictions and Details

We do not lend in IA or MD. You are not guaranteed approval. Once you apply and submit your credit and property information, we will confirm your eligibility. We don’t lend on cooperatives, condotels, investment properties, log homes, manufactured homes, mobile homes, or secondary homes. We will only originate one 1st lien mortgage per property per 12-month period. The maximum loan amount you qualify for will depend on additional factors, including type of loan, lien position, loan-to-value and your credit history. We may change rates, program terms, and conditions without notice. Discover Card accounts may not be paid off with this home loan. All loan programs are offered by Discover Bank, 2500 Lake Cook Road, Riverwoods, IL 60015. NMLS ID 684042.