The difference between being pre-qualified, pre-approved and final approval

When navigating the home purchasing process, you are introduced to a wide range of new terms and situations. There are many that are easy to confuse with one another, especially if you are a first-time homebuyer. Specifically, pre-qualified, pre-approved and final approval are often misused by home purchasers. While these terms sound and read as if similar, they are much different and come at different points in the home purchasing process.

Here is each term and what it means to you as a home buyer:


This is the first step in the mortgage process and it is designed to let you know about how much loan amount a lender may qualify you for. Being pre-qualified means a lender looked at your basic financial situation and said you are qualified to buy a home for a certain amount of money. According to Mortgage 101, this step should be done before you even begin looking for a home.

Being pre-qualified before you begin your search provides you with a ball park idea of how much you can afford on a down payment. Additionally, your lender will provide you with an approximate amount you could afford on a monthly mortgage.

By getting pre-qualified before your house hunt gets underway, you are able to keep a price range in mind. This will help start you off on the right path and keep your sights focused to only what you can afford. Goals are easier to establish if you have a figure in mind to stick to.

"Being pre-approved is considered the official start to the mortgage process."

However, it is important to note that this pre-qualification number can change. This number, while it does consider your financial status, it doesn't go as deep as a pre-approval, and therefore is likely to change by the time you make an offer. Keep in mind this is just a ballpark figure, and not something to get too specific about.

The pre-approval step is more detailed and time consuming than the pre-qualified process in that it involves you completing a mortgage application and authorizing the lender to complete an extensive financial background check. Your current credit score is also weighed into this step as well.

Agents and sellers consider the pre-approval to be the official start of the homebuying process, according to an article on While the pre-qualification step puts your search in financial perspective, it is more for you than for the lender or seller. When it comes to being pre-approved, this is when industry professionals begin to take you seriously.

Similarly, pre-approval comes with a conditional commitment for a loan amount, which goes a long way in impressing a home seller. When looking at a home after being pre-approved, home sellers know that you not only are interested, but that you have the funds to purchase as well.

However, as Mortgage 101 pointed out, a pre-approval doesn't guarantee you the funds. Only after a property appraisal and other verifications are met will the lender put you closer to funding your loan.

Your lender will help you differentiate the various terms.Know the various terminology to avoid confusion in the home purchasing process.

Final approval

You are granted final approval once all verifications are met and the entire lender requirements are satisfied. Essentially, once you receive final approval you are ready to close on your home. This step will come after property appraisals and other conditions that were placed in the pre-approval stage.

But even after receiving final approval, it is common that your lender will check your credit and employment situation again. This step is sometimes confused with a loan commitment, which is when a lender settles on a mortgage amount, but requires certain conditions be met first. However, the range of factors needing to be addressed generally aren't as extensive as those which come after the pre-approval step.

Once your conditions are met and final approval is granted, you are on your way to becoming the proud owner of a new home.

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