The home buying process typically includes getting pre-qualified and/or pre-approved for a mortgage. However, pre-qualification and pre-approval are not the same. And in a competitive market, knowing which to get could be the difference between landing your dream home and losing it to another buyer. Show
This blog breaks down the differences in mortgage pre-qualification and pre-approval so that you’re better prepared to make the winning offer. (Psst, looking for info on getting pre-approved versus pre-qualified for a vehicle instead? We have a blog about that, too! Check it out here.) What Does it Mean to be Pre-Qualified?Being pre-qualified means a lender has decided you will likely be approved for a loan up to a certain amount, based on your current financial situation. To get pre-qualified, you simply tell a lender your level of income, assets, and debt. The lender will then take that unverified information and determine the mortgage amount you will likely be approved for. There are no guarantees you will actually be approved for the same amount because the information hasn’t been independently verified. Benefits of Pre-Qualification
While pre-qualification is often the first step of the mortgage process, some sellers won’t take you seriously until you’ve been pre-approved. What Does it Mean to be Pre-Approved?Being pre-approved means you’ve actually been approved by a lender for a specific loan amount. When pre-approved, you will receive a letter that states your approved loan amount. Unlike getting pre-qualified, when getting pre-approved, you provide documented financial information (pay stubs, statements, obligations, credit report, etc.) to be reviewed and verified by the lender. Benefits
Something to keep in mind is that being pre-approved doesn’t guarantee you a loan. You still have to complete the application, go through the underwriting process, and wait for final approval. But being pre-approved indicates your financial ability and intent to purchase, so sellers look fondly upon buyers with pre-approval letters. Which One Should I Get?If you’re just starting the process of home buying, not sure just how much home you can afford, or if you’re not quite ready to buy yet, pre-qualification makes sense. Getting pre-qualified doesn’t affect your credit score, so it’s a good way to begin if you’re just browsing. However, if you’re ready to buy within 90 days, pre-approval is what you want. When the housing market is hot, homes sell fast — sometimes within hours of being listed. If you already have financing, you can move fast — which gives you an immediate advantage over other buyers. There is a small credit hit (typically around five points), but if you’re serious about buying a house, you need to get pre-approved right away. How to Get StartedAt Connexus, the easiest way to get pre-qualified or pre-approved is to give our professional mortgage team a call at 800.845.5025. Our team is happy to help you navigate the entire mortgage process, from the application stage to closing day. Get in touch today! The option to prequalify for a personal loan can be a huge help when you’re looking to borrow, as it lets you compare offers from multiple lenders with no commitment or negative impact on your credit score. When you apply for a loan prequalification, a lender analyzes your basic financial information to determine your eligibility without affecting your credit. A lender can often estimate your APR, loan amount and monthly payment, all without a hard credit check. Keep reading to learn more about how to get prequalified for a personal loan so you can find affordable rates and terms. In this guide…
What does it mean to prequalify for a personal loan?Many lenders let you check your potential loan terms, such as estimated APR and loan amount, without affecting your credit score. This is sometimes referred to as prequalifying for a loan. Personal loan prequalification only requires a soft credit inquiry and allows you to check loan eligibility before applying. Prequalifying for a personal loan doesn’t guarantee that you’ll be approved when you put in a formal application. During the formal application process, the lender will conduct a hard credit inquiry, which may reveal financial information that could change your eligibility or the terms you qualify for. LendingTree’s personal loan marketplace lets you compare offers from up to five personal loan lenders without affecting your credit score. What you need to prequalify for a personal loanWhat you need to provide for personal loan prequalification will depend on the lender, but you should prepare any paperwork with personal information about your debt, income and assets. Lenders will likely want to know your:
7 lenders that let you prequalify with a soft credit checkNot all lenders let you prequalify for a personal loan, but many will. Here’s a sample list of lenders that let you check your estimated personal loan terms, such as APR and loan amount, without affecting your credit score:
Why it’s important to prequalify for a personal loanPrequalifying for a personal loan lets you compare potential APRs across multiple lenders without affecting your credit score. This can help you find the personal loan lender that can offer you the lowest possible APR for your situation — which can save you money over the life of the loan. The table below compares two $20,000 loans, one with a 10.50% APR and the other with a 15.50%. Check it out to see how much the lower APR can save you.
 3 tips for prequalifying for a personal loan
1. Check your credit score, and work to improve it if necessaryPersonal loans are typically unsecured, meaning they don’t require collateral. This means that personal loan lenders rely heavily on your financial history to determine your eligibility as a borrower. Your credit score is a reliable indicator for lenders, since it factors in your payment history, credit utilization ratio, credit inquiries and other financial information. It can be hard to qualify for a personal loan if you have a bad credit score. To increase your chances of prequalifying for a personal loan, consider working to improve your credit score before you apply. Follow these tips to improve your credit score: 2. Calculate your debt-to-income ratioAnother factor that personal loan lenders consider when issuing loans is a candidate’s debt-to-income (DTI) ratio. That’s because your DTI ratio gauges your ability to afford new debt. Personal loan lenders like to see a debt-to-income ratio of 35% or less. Here’s how to calculate your DTI ratio: Monthly debt payments ÷ Monthly gross income = DTI ratio If your debt-to-income ratio is 36% or higher, consider paying down some of your debt before applying for a personal loan, or seeking an opportunity to increase your income. 3. Research lenders for your credit bandNot every lender will be a good fit for you, so search around for lenders that work with borrowers who have similar credit profiles to your own. Some lenders lend to borrowers with borrowers with fair or bad credit, but keep in mind that your loan terms may not be so favorable. With a high APR, it would be more costly to borrow a personal loan. Bad credit borrowers could also consider borrowing from a credit union, which may offer better terms than a traditional bank. Other lenders specialize in borrowers with good or excellent credit. By shopping around for a loan offer with the lowest possible APR for each unique financial situation, good credit borrowers may be able to save money on interest over the life of a loan. What should you do after you’re prequalified?While prequalification is an excellent tool for comparison shopping, it doesn’t guarantee that you’ll be approved for the loan. You’ll still need to submit a full application, upload supporting documentation and consent to a hard credit inquiry. Once you’ve got your offers, compare details like interest rate, APR, fees and repayment term to determine which one is best for you. If and when you find a prequalification offer you like, you can move forward by submitting an application directly with the lender. Every lender has its own process, but you’ll likely need to provide personal information, proof of income and other details. The lender will verify your information and, assuming everything goes smoothly, it will approve the loan. Once the loan is approved, the lender will likely disburse the funds to your bank account. If you’re consolidating debt, the funds will be sent directly to your creditors to pay off your debts. What if you can’t get prequalified for a personal loan?If you go through the prequalification process and are turned down for a loan, you might not be sure what to do next. Here are some steps that could help if you get denied:
Personal loan prequalification FAQ
What does “prequalify for a personal loan” mean?Prequalifying for a personal loan means that a lender thinks you’re a good candidate to formally apply for a personal loan. When you prequalify for a personal loan, a lender might provide you with loan offers, including estimated APR, monthly payment and loan amounts. Does prequalifying guarantee a loan?No. Being prequalified for a personal loan simply lets you see if you’re a good candidate for a personal loan without putting in a formal application. However, once you formally apply for a loan, you may no longer qualify due to information that was revealed during the hard credit check. Can you prequalify for a personal loan through multiple lenders?Yes. Since prequalification requires only a soft credit check, you can see if you’re a good candidate for a personal loan through multiple lenders. If you have more than one personal loan offer, then you can choose the loan offer that works best for your financial situation. Can I prequalify for a personal loan without a hard credit check?Yes. Many personal loan lenders let you check your eligibility with a soft credit inquiry, which will not affect your credit score. How much will I get approved for?That depends on a few factors, including the loan amounts offered by the lender. Check the lender website to see potential terms, such as minimum and maximum loan amount. The offered loan amount will also depend on your eligibility as a borrower, including your income. Is there a difference between getting prequalified and preapproved?Prequalification and preapproval are typically used interchangeably, according to the Consumer Financial Protection Bureau (CFPB), though there may be some legal distinctions between the two terms. That said, the process of prequalification and preapproval can differ from lender to lender, so it’s worth researching what a specific lender means when using this terminology. What is an adverse action notice?The Fair Credit Reporting Act requires a lender to explain why you were denied credit. Lenders can send you this information in the form of an adverse action letter. You may have been denied credit because of your credit score, debt-to-income ratio or credit utilization ratio, for example. What happens when you prequalify for a loan?What is mortgage prequalification? Prequalification is an early step in your homebuying journey. When you prequalify for a home loan, you're getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check.
Does preWhen you're pre-approved for a loan, it means the lender provisionally agrees to lend you the money, based on the preliminary information you give them. It doesn't mean you are guaranteed to get the loan. Final approval for the loan will be subject to a hard credit check and other final checks.
Can a loan be denied after preapproval?Yes, it's possible to have your loan application denied after getting preapproved for a mortgage. It doesn't seem fair, but the reason this is possible is because your loan has to go through the underwriting process before it's finalized.
Is it better to be preSome people use the terms interchangeably, but there are important differences that every homebuyer should understand. Pre-qualifying is just the first step. It gives you an idea of how large a loan you'll likely qualify for. Pre-approval is the second step, a conditional commitment to actually grant you the mortgage.
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If i prequalify for a loan will i get it
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