What is the difference between prequalification and pre-approval?

Prequalification is a mortgage originator’s opinion of what purchase price and loan amount a prospective homebuyer will qualify for and is based on the homebuyer’s answers to questions about their income, assets, liabilities, and credit history. It is not a commitment to lend and will vary depending on the level of experience of the mortgage originator conducting the qualification.

Pre-approval is a formal commitment to lend money issued by a lender for a specific purchase price and loan amount and is based on documentation provided by a prospective homebuyer, such as paychecks, tax returns, W-2s, asset statements, and a credit report, and has been verified and validated by that lender’s loan underwriter.