What is the difference between pre-qualification and pre-approval?

Lenders do not use these two words consistently, so the label matters less than what the lender actually did. In general, a pre-qualification is an informal estimate based on information you describe — income, debts, savings — without documents being checked. A pre-approval usually means the lender has reviewed some verification, such as pay stubs, bank statements and a credit report, and has written a letter stating the amount it may lend on certain assumptions.

The Consumer Financial Protection Bureau’s advice is to ask the lender what it verified rather than relying on the word printed on the letter. Neither one is a loan commitment: both are conditional, both can expire, and the final decision waits for a specific property and full underwriting.

When you are ready to make offers, the more thoroughly verified letter carries more weight with sellers. More in the Financing & Pre-Approval guide.