Pre-qualification and pre-approval sound very similar. However, they are different names for two different steps in the home buying and lending process.
Pre-qualification is a process where a lender asks for specific information to get a general financial view of a person needing a home loan. The information includes assets, debts and your income. The lender then can tell you the maximum home price that you can afford, and give you an idea of your monthly loan payment.
Pre-approval is the second step in the home lending process. This part of the process usually requires you to formally submit an application – this involves a fee, usually $300 to $400. With a pre-approval, you’ll receive a conditional commitment for the exact loan amount from your lender.
Both of these actions occur in the majority of loans and mortgages. However, you may be able to skip the pre-qualification process altogether. As well, your application fee could be waived or even absorbed into your mortgage depending on the institution.