When seeking a mortgage loan, the first step is to submit your financial information to a potential lender. Based on this information, the lender will be able to estimate the loan amount that you will likely qualify for, and issue a pre-qualification. This can help make the homebuying process more efficient, by narrowing your search to homes that you know are in your budget range. Pre-qualifying, however, is just the first step, and is not a commitment to lend.
With a pre-approval, the information you provide must be documented and verified, including a hard inquiry on your credit report. What results is a far more accurate and reliable examination of your financial picture, allowing lenders to issue a conditional commitment to lend and providing sellers with the highest confidence in your ability to follow through on the transaction. In a competitive market, having a pre-approval in hand when searching for a home can help ensure that you stand out among the crowd.