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Pre-approved vs. Pre-qualified: What’s the Difference?

Pre-approved vs. Pre-qualified: What’s the Difference?

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When you're ready to buy a car, a home or make a significant purchase, qualifying for a loan is a crucial step.

As you shop for rates in the marketplace, you will see two terms that are commonly used: “pre-approved” and “pre-qualified.” While they may sound similar, these terms have distinct meanings and implications.

Understanding the difference between pre-approval and pre-qualification can empower you to make informed decisions and streamline your borrowing process.

What does pre-qualified mean?

Pre-qualification is used by lenders to get an overall financial picture of a potential borrower. It is usually less in-depth compared to pre-approval and determines whether you can reasonably afford a mortgage or loan.

Getting pre-qualified can typically be done for free over the phone or online. It involves providing basic financial information, such as your income, assets and debts. This information is used to generate an approximate loan amount or rate for which you may qualify.

Pre-qualification is a generally quick process. Some lenders offer instant or automatic pre-qualification, and others may take some time – one to three days – to review your information.

At Apple, we know that pre-qualification is a great way to understand how much car you can afford. That’s why we offer pre-qualification in as little as two minutes when you shop for an Auto Loan through Apple.

Benefits of Pre-qualification

Quick and Simple Process

Pre-qualification is typically faster and less intensive than pre-approval. It allows you to obtain an initial assessment of your borrowing potential without the need for extensive documentation.

No Hard Credit Inquiry

During the pre-qualification process, lenders look at basic information, like assets and debt, to broadly determine if you’re an eligible borrower. This type of assessment doesn’t require any hard inquiries into your credit history, but a lender may conduct a soft inquiry, which typically has a minimal impact on your credit score.

Assesses Borrowing Potential

Pre-qualification gives you a general idea of what you might be able to afford. It serves as a starting point in your lending or mortgage process and helps you determine whether your financial situation aligns with your goals.

Drawbacks of Pre-qualification

Doesn’t Guarantee Approval

A pre-qualification is an informational first step in a lending or home-buying journey. It gives you a general estimate of what you can afford and what you can expect to be offered. It is not a binding agreement and does not guarantee that you will be approved when you fill out an application.

Figures Can Change

Some borrowers are shocked to discover that their pre-qualified amount or rate has changed when they go through the application process. There are a several reasons why this happens:

  1. The borrower’s figures provided during the pre-qualification process may not be entirely accurate
  2. The lender’s policies may have changed
  3. The interest rates may have gone up between pre-qualifying and applying.

If this ever happens, reaching out to the lender is the best way to clarify any discrepancies and help you understand where your loan or mortgage stands.

What does pre-approved mean?

Pre-approval is a more rigorous and comprehensive process conducted by lenders to evaluate your creditworthiness. This process usually involves verifying your income, employment, assets, debts and credit history.

To become pre-approved, you need to submit an official mortgage or loan application, along with the necessary documentation, such as income verification, employment history, credit report and details about your assets and liabilities.

From there, the lender will assess your financial profile and determine the maximum loan amount they are willing to offer you.

Benefits of Pre-approval

Proves You’re an Ideal Borrower

Pre-approval strengthens your position because it demonstrates to lenders that you are a serious and capable borrower. It shows that you are financially responsible and are ready to proceed with the financing and purchasing.

Clear Price Range

Knowing the maximum loan amount you qualify for helps you set a realistic budget and narrow down your search. This clarity enables you to focus on cars, properties or other large purchases that are within your financial capabilities.

Faster Closing Process

Since the lender has already reviewed your financial documents during pre-approval, the closing process tends to be quicker and smoother compared to pre-qualification.

Drawbacks of Pre-approval

Hard Credit Inquiry

Because pre-approval requires a more in-depth assessment of your financial profile, most lenders perform a hard credit inquiry in the pre-approval process. Hard credit inquiries can cause your credit score to temporarily drop, which can be a concern for borrowers working to improve their credit score.

Offer Expires

Pre-approval offers are typically only valid for a specific length of time before they expire, such as 30-90 days after the approval date.



Both pre-approval and pre-qualification have their benefits, and it's important to understand your specific needs and circumstances.

If you're serious about buying a home or making a significant purchase, obtaining pre-approval can give you a competitive edge and a clearer understanding of your budget. However, if you're in the early stages of exploring your options, pre-qualification can provide a useful starting point to help you assess your borrowing potential.

Ultimately, working closely with a knowledgeable lender or mortgage professional will help you navigate the complexities. To learn more about how you can secure a loan through Apple FCU, schedule a video appointment, call us 703-788-4800 or visit a branch.


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