What is the difference between pre-qualifying and pre-approval?

Pre-qualifying for a mortgage up to a certain amount is an increasingly popular practice among buyers who don't want to worry about going through the approval process after they've found the home they want. It's a verbal exchange in which the lender tells you in advance approximately how much money you are able to borrow, based upon the information you provide the lender on your debt and income.

Pre-approval goes a step further than pre-qualifying. It is an actual commitment to lend, provided that, when the borrower is ready to buy, he or she still meets all the qualifying conditions that were met at the time of conditional approval. We strongly recommend it, as it essentially gives your offer the same value as an all-cash offer.