Q: What’s the difference between pre-qualification and pre-approval?
A: Pre-qualification means the lender has taken your basic personal financial information (income, debts, assets, etc.) and run them through a formula. The result is the amount of money you’re qualified to borrow for a mortgage. Pre-approval takes the same process a step farther. You’ll actually apply for the loan and the lender will approve your application with certain caveats. The nice thing is that the lender commits to the loan and interest rate up front, so you know you have your financing in place before you shop for a home.
By the way, lenders will pre-qualify you for free. Some may charge you an application fee for pre-approval, but others will waive it.