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If you’re in the market for a mortgage, you’ve probably come across lenders that offer prequalifications and pre-approvals. (We call the latter Verified Approvals at Mr. Cooper and many lenders use other names.) And this may have you wondering, “Is a prequalification the same as a pre-approval?”
Both provide an estimate of how big of a loan a borrower can afford and can be key when setting a budget for a house. They can also help vouch for your ability to get a mortgage once you make an offer, but one carries more weight than the other. By understanding each, you’ll be ready to act when the perfect listing pops up.
What’s the difference between a prequalification and pre-approval or Verified Approval?
A prequalification typically involves a quick application process, but it carries less weight in the homebuying process. To become prequalified, a borrower often verbally provides the lender with an overall picture of their finances—income, debts, assets, etc. They may also need to agree to a credit check, though standards vary by lender. Once complete, lenders provide a prequalification letter with a ballpark estimate of how much money the borrower qualifies for.
In comparison, a pre-approval—or Verified Approval—takes the application process a step further. At Mr. Cooper, borrowers must provide physical documentation to show proof of income and assets and agree to a hard credit pull. One of our underwriters then reviews and verifies all the borrower’s financial information and credit. Once approved, these approvals provide a more accurate estimate of what a borrower may afford. Given that, they can give a seller added confidence in your bid.
When do I need each?
If you’re just beginning your homebuying journey and casually looking at homes, a prequalification letter may be a good place to start. It’s free, has a short application process, and prequalification letters are typically available within minutes. But keep in mind that if a hard credit check is involved, it may affect your credit score.
On the other hand, if you’re actively looking for a home or are ready to make a serious offer, a Verified Approval is probably the way to go. You’ll get a more precise amount for a mortgage and be able to shop for homes with added confidence. Plus, home sellers will be more likely to accept your offer knowing you’ve been reviewed by a lender. This can be especially helpful in a bidding war.
How can I apply and how long does the application process take?
Apply for a Mr. Cooper Prequalification or Verified Approval here. Options are available online or by phone, and a prequalification letter could be in your hands within minutes. Our Verified Approval is available as early as the same day or next day. Both are fast, free, and show sellers that you’ve got one of the nation’s largest servicers behind your offer. So, wherever you are in your homebuying journey, we’ll be here to help.