Mortgage prequalification versus preapproval

Depending on what stage you are at in the home shopping journey, you may have different needs when it comes to receiving an estimate and approval for a loan. You have options you can utilize to help you through your journey — namely, a prequalification and a preapproval. When you’re ready to buy a home, knowing the difference between each may help you feel more confident about your borrowing power.

You may be asked to secure a prequalification or preapproval during the homebuying journey to help show potential sellers you're a serious buyer — obtaining these may give you a competitive edge while looking for homes and securing financing.

At Wells Fargo, both the prequalification and preapproval processes take a preliminary look at your financial information to help you understand how much you may be able to afford while preparing to buy a home. And while they have their differences, these options have more similarities than you may think:

• Neither one comes with any fees or obligations.
• Neither is a formal commitment to lend or impacts your credit score.
• Both rely on stated income and require little to no financial documents.
• Both provide an estimate of how much you could borrow to buy a home.

Keep in mind that factors like your income, debt, the amount you have for a down payment, and your credit history may affect the estimate you receive.

The prequalification and preapproval are generally performed at different stages of the homebuying journey. So, what are the differences?

You can obtain a prequalification early in the process before beginning your homebuying journey. If you get prequalified, you'll receive an informal estimate about how much you might be able to afford while searching for a home. Here are some key details for a Wells Fargo prequalification:

• A prequalification is offered online only with no lender review.
• A prequalification is completed as a credit check that doesn’t impact your credit score.
• It's based on the financial information you provide.
• You receive notice of the prequalification immediately after completing it online.

Think of a prequalification as a method to help you look for homes within your financial comfort zone — it gives you a better idea of your potential loan amount, interest rate, and monthly mortgage payment.

While prequalification happens early in the homebuying process, a preapproval comes into play before you make a formal offer on a home. At Wells Fargo, we provide our home shoppers with a PriorityBuyer^® letter or a Conditional Credit Approval letter to give you an advantage in competitive markets and show sellers you're a serious buyer.

The PriorityBuyer^® letter provides an estimate of how much you may be able to borrow to help your homebuying search. Some key details about the PriorityBuyer^® letter:

• It will require you to speak with a Home Mortgage Consultant to complete the process.
• While there is no impact to your credit score, the PriorityBuyer^® letter process will require an additional credit check and your social security number.
• Your PriorityBuyer^® letter is valid for 120 days.
• You receive your letter within 30 minutes to an hour after completing.

A Conditional Credit Approval letter helps you make a competitive offer by showing that an underwriter has reviewed your file and given you an initial decision on your conditional credit approval. Please note that even with a Conditional Credit Approval, you may still get turned down for a home loan.

Some key details about the Conditional Credit Approval letter:

• It will require you to speak with a Home Mortgage Consultant and an underwriter to complete the process.
• While there is no impact to your credit score, the Conditional Credit Approval letter process will require an additional credit check, your social security number, and documentation that shows proof of income, assets, and credit.
• Your letter is valid for 120 days.
• You receive your Conditional Credit Approval letter within 7-10 business days after all required documents have been received.

Know that we're here to support you every step of the way with Home Mortgage Consultants ready to help. If you're just beginning your homebuying journey, use our home affordability calculator to get started on the prequalification process, or check out more information for first time homebuyers. At Wells Fargo, discover how we can help make your dream of owning a home a reality.