To make the process of purchasing a home a little easier, buyers are often advised to get pre-approved for a mortgage. They'll also hear recommendations that they should get pre-qualified for the home loan.

Some lenders will use the terms interchangeably. The Consumer Financial Protection Bureau even suggests that a pre-qualification letter and a pre-approval letter are fairly similar, since both will give you an idea of how large a mortgage a lender is willing to approve for you.

However, a pre-qualification letter is sometimes considered a less reliable document than a pre-approval letter. You'll want to make sure that the process you'll go through will be able to assure sellers that a lender will approve your offer.

Pre-qualification

Getting a pre-qualification letter is often a less rigorous process than getting a pre-approval letter. Lisa Kaplan Gordon, writing for the National Association of Realtors, says the letter may only provide an estimate for how large a loan you'll be approved for.

The process will require much of the same information you would provide for a pre-approval. Brian O'Connell, writing for the financial site Investopedia, says these factors include your income, monetary assets, and debts.

Pre-qualification can be less reliable since the lender's estimate might be based only on information you provide them. The process might not ask for proof of income or otherwise take steps to confirm the information you've provided.

You may be asked to provide a credit score as part of the process, and you may be able to give an approximate number based on credit reporting services. But this information might not be confirmed as part of pre-qualification, either. Gabriela Islas, writing for the retail mortgage lender Quicken Loans, says a lender generally won't pull up your credit score if you are looking for a pre-qualification letter.

One benefit of pre-qualification is that it is usually an easier process to complete. O'Connell says you may be able to get pre-qualified through an online form or over the phone. In addition, pre-qualification can also be completed at no cost.

However, since pre-qualification is based on information supplied by the buyer, it is not considered as reliable as pre-approval. A lender may not approve a loan for the offer you make on a property if your finances are not as robust as you expected.

Pre-qualification is a good step to take if you are interested in buying a home, since it will give you an idea of how much you'll be able to spend on a property. This will help you narrow your search to homes you'll be able to afford, and you can still get a pre-approval letter after being pre-qualified.

Pre-approval

The pre-approval process requires you to provide a lender with more documentation to outline your financial situation. Kaplan says the lender will take a look at your pay stubs, tax forms, bank statements, and other pertinent information to get a clear idea of your income, monthly payments, and other financial considerations.

The lender will also look at your credit report. This will let them see if you have a history of making debt payments on time or if you have any red flags such as bankruptcies or defaults. Islas says the credit report will also let the lender assess your debt-to-income ratio, which is essential in determining the mortgage you will be approved for.

Getting pre-approved will require you to provide some personal information, namely your Social Security number. O'Connell says you'll likely have to pay an application fee as well.

A pre-approval not only sets a home loan amount the lender is willing to approve, but also gives you some other advantages as well. The lender will give you an idea of the interest rate that will be charged on your mortgage, and you may even be able to lock in an advantageous rate.

Pre-approval will make a stronger impression on a seller, since it assures them that a lender is willing to approve your offer. Gordon says it can also speed up the process of purchasing a home, since you'll be approved for a certain price point as long as the appraisal confirms the property's value and no significant changes have affected your finances since the pre-approval.