In pre-qualification, you as a borrower, submit your financial background to a lender: Your debt, your income and your assets. Based on that information, a lender will provide you an estimate on how much money you can expect to borrow. Pre-qualification can be done remotely. You do not need to meet the lender face to face. You can call them or even get the whole process done online. And there is no cost involved.

Pre-qualification comes handy when it’s time to make an offer. When you wish to put an offer on the house, to consider you as a serious buyer, the listing agent will most likely ask you if you are pre-qualified by a lender.

Next step is to get pre-approved by the lender. This process is much more involved. Some lenders charge for this service. Some don’t. Here, you will need to fill out actual mortgage application along with providing all the financial documents to be preapproved.

The lender will make thorough check on all the facts that you present and also check your credit rating. Once lender is assured of your financial base, they will pre-approve you for a mortgage up to certain amount of money. Interest rate they will charge to you will also be based on your approval and credit status. They will summarize all that and provide you pre-approval document that you can show to the seller.