How does pre-qualification differ from pre-approval?

Pre-qualification is a preliminary step in the mortgage process that provides a general idea of how much a borrower may be able to borrow based on self-reported financial information, such as income and debts, without undergoing a formal assessment. This informal nature means that pre-qualification does not require the lender to verify the borrower's financial information or perform credit checks, making it a faster and less cumbersome process for prospective borrowers.

In contrast, pre-approval involves a more in-depth assessment where the lender reviews the borrower’s financial background, verifies income, examines credit history, and considers other documents before providing a clearer picture of how much they are willing to loan and under what terms. Since the pre-qualification process does not include these formal assessments or checks, it serves as an introductory step before a borrower can move on to the more rigorous pre-approval stage.