Before applying for a mortgage, prospective homebuyers have the option of shopping around for the right lender. In the process, they may come across two terms that sound similar, but are actually quite different: prequalification and preapproval.
Getting prequalified for a mortgage is not the same as being preapproved. Prequalification is often a faster, easy way to get a rough estimate of what kind of loan would work for a borrower, given their current income and assets.
On the other hand, preapproval takes more time and goes into greater detail about the applicant’s finances and credit history. It’s still not a guarantee to authorize the loan, but a mortgage preapproval letter often comes in handy during the homebuying process.