When you are ready to buy a home, you need to figure out how much you can borrow. Many sellers like to see that you have already been considered by a lender, and that you have been approved for an amount that will allow you to buy the home. Part of the process to qualify for a mortgage can include a pre-qualification or a pre-approval. Both of these actions can help you when it comes to letting sellers know you are serious. However, they are two slightly different actions.


In this step, you usually do not have to submit to a hard credit inquiry. You share information about your financial situation, and the mortgage lender gives you an estimate of what you might expect to be able to borrow. Knowing your own credit score ahead of time can help the lender determine how much you can afford. However, it is important to note that a pre-qualification is not the final amount you can borrow. Even if you are pre-qualified, you could still not get approved for a home loan in that amount. Some sellers won’t accept a pre-qualification, especially if the home is high-end.


Rather than being an estimate, a pre-approval is a statement of what the mortgage lender will approve you for. You can get an official document stating that you have already been approved for a certain amount. This can be very helpful in some cases. You will have to allow a hard credit inquiry if you want pre-approval, however. If you are a serious buyer, a pre-approval can be helpful, especially with more expensive properties. Some real estate agents, and some sellers, won’t work with you unless they know exactly what your price range is, and unless you have a solid pre-approval from the bank to back your claim of what you can borrow.


It is important to realize that pre-qualification and pre-approval aren’t forever. Usually, there is a time limit placed on these actions. Your pre-approval might expire after 30 or 60 days. This is because your credit situation can change in that time. Your credit report — and your credit score — is constantly being updated. This means that what was true when the pre-approval was issued might not be true after a couple of months. Make sure you understand the expiration on your pre-qualification or pre-approval, and be ready to buy a home within that stated time frame.