What’s the Primary Benefit of Being Prequalified for a Mortgage?

What’s the primary benefit of being prequalified for a mortgage? Do you really need a mortgage prequalification?

Yes. But it’s not just for the benefit of your real estate agent or mortgage lender. It’s really for you.

You’ll see a lot of talk about how prequalification makes your “offer more serious.” That’s not true anymore; in most markets, prequalification is required for an offer. You’re not going to get very far without one.

But the reality is that the primary benefit of being prequalified for a mortgage is that it tells you how much you can spend. You could be either positively or negatively surprised at the number.

Let’s look at everything a home buyer needs to know about getting a qualification… and the primary benefit of being prequalified for a mortgage.

First: What is a Prequalification Letter?

A prequalification letter is a document that states the loan amount a lender is willing to make to a borrower. It estimates how much financing the borrower could obtain and is not a commitment to lend.

The terms prequalification and preapproval are used interchangeably, but they’re different. A pre-qualification is an extremely preliminary amount. A preapproval is more rigorous.

How Do You Get a Prequalification Letter?

To get a prequalification letter, you must provide your lender with basic information about your financial situation, including your income, debts, and assets. Based on this information, the lender will give you a preliminary estimate of how much they will lend you. But they will trust you on the numbers. Make sure they’re accurate.

When Should You Get Your Prequalification?

Ideally, you should get your prequalification letter before beginning your home search. This way, you will know how much financing you can expect to receive and can narrow down your search to homes that fit within your budget.

Many will tell you that having a prequalification letter in hand may give you an advantage over other buyers who haven’t gone through the process. The truth is that house searching without a prequalification or preapproval letter is virtually unheard of today. 

Most real estate agents won’t show you houses until you are prequalified. Since you can get a prequalification in 5 minutes online, not having one indicates you’re not interested in the process.

What Are the Advantages of a Prequalification Letter?

There are several advantages to getting a prequalification letter. The major one, of course, is finding out how much you can afford.

Find Out How Much You Can Afford

Your lender will review your financial situation and give you an estimate of how much they’re willing to lend you. This can help narrow your home search to properties within your budget. The more accurate your numbers are, the more accurate theirs will be.

Make a Stronger Offer

About ten years ago, the standard advice was that a prequalification letter shows that you are serious about buying a home and have the financial backing to do so. Now, though, you need a preapproval to do this. Prequalification is what allows you to make an offer at all. Most agents won’t write an offer without at least a prequalification.

So, at minimum, you need a prequalification letter to get started. Otherwise, you won’t even know how much you can spend.

If you want to make a stronger offer, get a preapproval or even a “guaranteed preapproval” (already underwritten).

Differences Between a Prequalification and Preapproval

A pre-approval is based on a more thorough review of your financial situation. To get preapproval, you must provide your lender with additional documentation, such as tax returns, bank statements, and proof of income. Based on this information, the lender will give you a more accurate estimate of how much they will lend you.

A pre-approval letter is generally more useful than a prequalification letter because it gives you a more accurate estimate of how much financing you can expect. Additionally, having a pre-approval letter can give you a legitimate advantage over other buyers who haven’t completed the mortgage pre-approval process.

A pre-approval will also make the lending process smoother later, as the loan servicer will already have most of the documentation they would need.

You should get a prequalification letter first, but get a preapproval once you’re serious about your house search. A pre-approval will make the rest of the process much easier, as there will likely be far fewer surprises.

Does a Prequalification or Preapproval Guarantee the Loan?

A prequalification or preapproval is not a guarantee that you will receive financing. The decision to approve or deny a loan application is ultimately up to the lender. However, having a prequalification or preapproval letter from a lender can give you an advantage when competing against other buyers who don’t have one.

Today, there are some lenders who offer guaranteed preapprovals, similar to conditional approval—such as Rocket Mortgage and Better. These are underwritten before the offer. There still could be the possibility that the loan falls through, but it is unlikely.

home buying process timeline

How Long Does Prequalification or Mortgage Preapproval Take?

Prequalification can take seconds online or a few hours through a lender. You can sit down with a lender and get a prequalification that day. A preapproval will take a little longer, as you’ll need to send documents and have them verified. A guaranteed preapproval may take a week or two (or several) because the loan is underwritten. 

What Can Cause a Loan to Fall Through After Prequalification?

There are several reasons why a loan might fall through after prequalification. The most common reason is that the borrower’s financial situation changes between the time of prequalification and closing. 

For example, the borrower may lose their job or take on additional debt. Additionally, the property may appraise for less than the purchase price, reducing the amount of financing the borrower would be eligible for.

Another common reason for a loan to fall through is that the terms of the loan change. For example, the interest rate may increase, or the loan program may no longer be available.

What Happens If You Can’t Prequalify?

If you can’t prequalify for a mortgage, understanding why is important. The mortgage lender should be able to tell you why you didn’t qualify.

There could be an error on your credit report, or you may not have enough income to qualify for the loan amount you seek. It could even be something minimal; they may not have been able to verify your identity through the website, for example.

But often, it’s that you need to fix your credit score. Lenders can prequalify you based on your income for a proportional loan amount, but they won’t be able to prequalify you if your credit score doesn’t meet their standards. To improve your credit score, you can pay down debts, fix errors on your report, and continue to pay your debts on time.


A prequalification letter estimates how much financing you could obtain from a lender. It’s based on the information you provide about your financial situation, including your income, debts, and assets.

Without a prequalification letter, a home seller may not trust that you can qualify for a home loan.

What’s the primary benefit of being prequalified for a mortgage?

  • You need a prequalification letter before you start searching for a home, but the primary benefit is that it tells you how much you qualify for.
  • A prequalification letter can be for a conventional loan, FHA loan, VA loan, or any other type of home loan.
  • A preapproval, however, is better than a pre-qualification.


What does it mean to be prequalified for a mortgage loan?

It means that a loan officer has looked at your credit report and other financial information and has determined that you would likely be approved for a mortgage loan up to a certain amount.

What is the difference between pre-approved and pre-qualified?

Pre-approval is based on more extensive research and signifies that you are more likely to be approved for a loan. Pre-qualification is the first step to buying a house and gives you an idea of how much you can borrow.

Does pre-approval guarantee a loan?

A pre-approval is not a guarantee of a loan. If your financial situation changes between pre-approved and applying for the loan, your loan may be denied or given a lower amount than you were pre-approved for.

Does it matter who you get prequalified with?

It can, depending on the lender. Some lenders will pull your credit report when you get prequalified, while others will not. It’s always a good idea to shop around and compare offers from multiple lenders to ensure you’re getting the best deal. 

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