mortgage pre-qualification

Why You Should Get A Mortgage Pre-Qualification Letter

Going to an open house and shopping for new properties is the fun part of home shopping. But if you are serious about buying a house, you should talk to a lender first. Even before looking for a new home, you should get a pre-qualification for a mortgage.

If pre-qualification sounds foreign to you, here’s a primer on what it is all about.

What is a pre-qualification letter for a mortgage?

When buying a home, you should check your finances. While you can make a budget on your own, it’s better to know what mortgage lenders think about your financial status. This is precisely why pre-qualification can help you.

Simply put, pre-qualification is a basic review of your financial status based on what you declare. Think of this step as consulting a lender.

Through pre-qualification, you’ll know if you can apply for a mortgage. Your lender will also give you an estimate of how much you can borrow.

If you’re buying a house for the first time, it’s better to get a pre-qualification letter.

You Don’t Need to Prepare Anything for Pre-Qualification for a Mortgage

Pre-qualification should be the first step before you start shopping for properties.

To get a pre-qualification for a mortgage, you have to consult a bank or a lender. Are you curious about what you need to present to get a mortgage pre-qualification?


Most mortgage lenders and brokers have a pre-qualification form that you need to fill out. This form will ask for details such as your income, assets, debt, and credit score.

Some lenders allow you to apply for pre-qualification letter over the phone. You can also get a pre-qualification online. Bankrate has a useful mortgage pre-qualification online calculator you can check out.

Lenders will not ask for any document at this stage. They would simply use what you disclosed in your form or interview. It can take a day or two before you receive your pre-qualification letter.

While getting a pre-qualification it’s also useful to go lender shopping. According to the Bureau of Consumer Financial Protection, around 30% of borrowers don’t do mortgage shopping. Sticking to just one lender can cost you $300 a year. During the life of your loan, this decision can cost you thousands of dollars.

Pre-qualification Will NOT Affect Your Credit Score 

If you’re thinking twice about getting a pre-qualification because of your credit score, don’t worry. Lenders will not do a hard pull. So, you should not see inquiries which can pull your credit score down if you get a pre-qualification.

Pre-qualification for a mortgage is an informal assessment of your finances. Lenders will use your debt-to-income ratio and other information to make an estimate. Since this is a pre-qual, the lender will not verify what you disclosed.

If you’re not checking your credit score on a regular basis, you should be doing it now. It’s better to know what your credit score is before consulting a lender. You can get a free copy of your credit report from Equifax, Experian, and TransUnion once every 12 months.

If you are applying for pre-approval, it’s another story. Inquiries related to a pre-approval may reflect on your credit score.

Here’s a useful tip if you are mortgage shopping – do everything within a 14-day window.  Even if there are multiple inquiries within the two-week period, it will be counted as one. Take note that some lenders use the new 45-day window. But it’s better to stick to the two-week period while mortgage shopping.

This technique applies not just for a mortgage but for student loans and auto loans as well.

Searching for new credit should affect no more than 10% of your FICO score. In most cases, these inquiries will have a small effect on your credit score. You should only worry about inquiries if you have been shopping for a new mortgage for months.

A Pre-Qualification Letter is Different From a Pre-Approval

Mortgage loan pre-qualification is an initial review of your finances. Getting a pre-qualification for a mortgage will not guarantee you’ll get a loan. But it can be valuable for other reasons.

After getting a pre-qualification you may or may not seek a pre-approval.  Lenders will only issue a pre-approval after vetting the income you declared.

For pre-approval, you have to submit bank statements, tax returns, and employment records. Lenders will also pull your credit records.

Mortgage Pre-Approval vs Pre-Qualification

Unlike a pre-qual, pre-approval carries actual value. A pre-approval is a conditional commitment from a lender.

As noted above, the mortgage pre-qualification process is simpler. Lenders assess your financial capacity for the details you self-declare. But in pre-approval, your lender needs to do a credit check. They will also verify your financial and employment documents. Your pre-approval shows how much your lender believes you can afford.

How long does pre-qualification for a mortgage last?

Pre-qualification is simply a letter stating you are qualified for a loan and how much. Since the pre-qualification is an estimate, there is usually no period of validity.

Mortgage pre-approval, on the other hand, has a validity of 60 to 90 days.

You are not obliged to use the lender where you got a pre-qualification or pre-approval. This means that you are still free to shop for other lenders. 

Even If You Have Been Pre-qualified Your Lender May Not Give You A Pre-Approval

In a pre-qualification, neither you nor the lender commits to anything. It is simply a way to see if you can buy a home and what your price range would be. The amount you’ll get is an estimate.

This means that pre-qualification doesn’t always lead to pre-approval. If there are issues with your documents, your lender may reject your application. If there are serious problems with your finances, a lender may refuse to issue a pre-approval.

Moreover, the amount in the pre-qualification may increase or decrease when you get your pre-approval. How much you can borrow will depend on your verified income and assets.

Sometimes, A Pre-Qualification Letter Is Better Than Nothing 

Ninety percent of serious house buyers will not have issues with pre-approval. While waiting for this document, a pre-qualification letter could help you get started. Even if most brokers require a pre-approval to make sure you can afford a property. But some agents would be willing to show you around even if you only have a pre-qual.

A pre-qualification could give you leverage especially if there are other potential buyers. If you have a pre-qualification and other buyers don’t have anything to show, you will have a stronger offer.  At the same time, you will also be making an offer within your paying capacity.

At this point, you may be curious about how a pre-qualification letter looks like.

Pre-Qualification Letter Sample

ABC Bank
Pre-qualification Letter


Borrower Name:

ABC Bank advises all interested parties that the above-named individual is pre-qualified for a mortgage with the following terms:

  • Loan Type: (fixed rate late or variable loan)
  • Loan Amount: (how much money you can borrow from the lender based on your financial status)
  • Down payment:
  • Loan Term:
  • Interest Rate:

This assessment is based on unverified information, which although deemed to be reliable, may not be guaranteed to be accurate. This letter is not a guarantee of loan approval or a commitment to offer a loan to the borrower under the terms specified above. ABC Bank may issue a loan commitment on the loan after the receipt of the mortgage application and the verification of the relevant supporting documents.

Pre-qualification letter formats may vary from one lender to another. However, the lender would clearly indicate that the information used for the pre-qualification is not verified.

First Time Home Buyers Should Consider Getting Pre-Qualification For A Mortgage 

Unless you plan to buy a house in cash, you have to apply for a loan. So, it’s also useful to shop around for lenders and request a pre-qual.

If you’re serious about owning a home, get a pre-qualification for a mortgage. This is also helpful if it’s your first time to apply for a mortgage.

By getting a pre-qual, you will have a better idea about how much you can afford. It also gives you a chance to know if you are eligible for a loan.

A pre-qualification can also help you make a budget. If you already have one, you can compare your number with that of your lender’s.

While a pre-qualification for a mortgage has merits, you should still apply for pre-approval. Sellers and brokers prefer buyers with pre-approval because it shows your buying power. With a pre-approval, you can make a stronger offer. So, if you find a property you like, sellers would take your offer more seriously.

With all these benefits in mind, getting a pre-qualification could benefit you. Plus, the pre-qualification letter won’t cost you anything. You can even get one online!

Related Articles:
How to Make a Realistic Budget for Buying a House
First Time Home Buyer Taxes: 5 Reasons You Need an Expert
23 Real Estate Websites You Should Never Miss Out
Buyer Representation Agreements: Here’s What Happens When You Sign

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