Before a home buyer makes an appointment to preview a home, they should get their financial house in order. A mortgage lender streamlines the process, and they can provide valuable tips on what to do about credit, debt, or income issues.

A home lender can create a preapproval or a prequalification letter. Once a buyer has this document, they are ready to start shopping, but there is a significant difference between the two papers.


Someone who presents a prequalification has started the initial process of applying for a home loan. This means they talked with a lender and provided general information about their household income and debt.

The loan officer takes those details and constructs some possible loan options. The data will not be verified. All of the information is procured in good faith. The advantages of these letters are they are quick to get, often over a phone call, and it starts the ball rolling in the home buying process.

The disadvantages are the terms of the loan could change if the real numbers are significantly different. If it is a seller’s market and buyers are competing for every home, a prequalification letter is not as strong as a preapproval.


This process is more intense. It requires a bit of legwork and time, but there are more benefits. If someone opts for this route first, they will need to supply the lender with paycheck stubs, bank statements, and tax returns. Also, they must agree to let the officer pull their credit and pay for any fees involved.

The process is not instantaneous, like the prequalification application. Once approved, the document is only valid for a month or two. This timeframe is established so that the lender can monitor any income or debt fluctuations and adjust the loan amount if necessary.

The advantages of having a preapproval letter are the buyers know their exact purchasing power, and the offer is stronger. The seller will see the full approval, and they will know they have a prepared and serious buyer.

Buyers should not make any changes to their financial standing while house hunting. Once in escrow, the loan officer will verify the previous information to ensure it is still all in good standing.