Blog by Evergreen Homes

Understanding Mortgage Pre-Qualification: What It Is and Isn’t

Posted by Evergreen Homes on June 8, 2017 at 6:00 AM

Pre-qualification.jpgSo, you’ve begun your search for a new home in Canton, Michigan. How exciting! One of the first steps you will want to take in the new home buying process is researching home financing options. From understanding the different types of loans, to understanding the difference between a mortgage pre-qualification and pre-approval, we know the process can be a little overwhelming. But it doesn’t have to be. To help start your journey off on the right foot, let’s review the mortgage pre-qualification process and what it is, and isn’t.

Often, the words pre-qualified and pre-approved are used interchangeably. Some homebuyers believe they mean the same thing. They do not, however, and it is important for a new homebuyer to understand the difference.


Pre-qualification is the first step in the mortgage process. It means you supply the bank or lender with your overall financial picture, including debt, income, and assets. Some lenders pull a credit report at this step and others do not. You may also discuss your goals with your lender and he/she can let you know the various mortgage options. The lender will then provide you with a pre-qualification amount, which is an estimate of the maximum loan amount you may be approved for. The process is very informal. Be aware, however, that at this stage the loan is not a sure thing. The lender is not obligated to provide you with a loan in any amount at this point.


The pre-approval step is much more involved and includes filling out a mortgage application and providing documentation to your lender such as tax returns, W-2s, pay stubs, etc. If your lender did not pull a credit report during the pre-qualification process, they will now do so. Your lender then uses all of the financial information you provided to confirm your ability to obtain financing and specify your exact approval amount. Unlike pre-qualification, pre-approval is a sure thing. If you are “pre-approved” it means you will be granted a loan up to the approved amount should you decide to move forward with the lender (usually for a particular period, such as 90 days).

Benefits of Pre-Qualifying for a Home Loan

Once you receive a pre-qualified loan amount from your lender, you will be better able to move forward with the home-buying process. You will now know realistically how much you can afford to spend on a new home. When your lender sends your pre-qualifying loan amount to you, the information should include an estimated maximum total loan amount for your budget, plus your estimated monthly house payment. But keep in mind, the estimated monthly house payment may change once you move into the loan approval stage — depending on the amount of taxes, interest, fees and insurance you’ll need to pay on your loan. You will know what your final monthly house payment is once you have finalized your new home selection and have provided your down payment amount and credit information to your lender. Keep in mind though when making an offer on a new home, pre-qualification doesn’t carry the same weight as being a pre-approved buyer.

The mortgage process can be confusing. That is why Evergreen Homes has assembled a group of Preferred Lenders with significant experience and success in home financing as a resource for new homebuyers. We encourage you to reach out to them if you have any questions regarding the mortgage process.

Topics: Building New Home Tips, Home Investment

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