Prequalified vs. Preapproved

Borrowing power

Borrowing power is the amount of money a lender has pre qualified you for a home purchase. Real Estate Agents will want to know how much you have been prequalified for before taking you to view properties.


The estimated dollar amount you are able to borrow based on your income  is called a prequalification. Your mortgage broker will ask you for income documentation and credit history to prequalify you for a home.

When you have been prequalified your lender will also discuss loan program options with you.

A common question regarding pre qualification is , do I have to buy that much house? The answer is NO.  The amount you have been pre qualified for  is an estimate on the most you can borrow for a home loan.  This dollar amount is to help you and your realtor filter through the homes on the market.

The Pre-approval

The preapproval will allow for you to make an offer on a home. Additional documentation may be requested from the lender to prove your financial and credit situation has not decreased since your prequalification.

Things not to do prior to closing on a home will include activities  like  opening  any new credit lines or changing jobs.  These simple activities will affect your credit score and borrowing ability.

If a bigger and better job opportunity knocks on your door let your broker know if you are interested in taking the position and note that changing from W2 to self employed will cancel our pre approval.

Your pre approval was granted based on your current credit and debt ratio. Any drop to your credit score or increase to the amount of debt you have will cancel your pre approval.

Cash Reserves

Lenders will request a history of “seasoned funds” or “cash reserves”. Season and reserve mean the funds have settled in your bank account for several months, typically a minimum of two months. You will be requested to provide a minimum of 2 months current bank statements to the lender as a documented paper trail.

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