Find out how much house you can borrow before you start looking – and how you can make the strongest offer possible on the property you choose.
If you’re ready to make your dream of owning a home a reality, you’ve probably already heard that you should consider getting prequalified adatext or preapproved adatext for a mortgage. It’s time to understand exactly what each of those terms means and how they might help you. And when you’re working toward a goal this big, you want every advantage.
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You may qualify to borrow more money than you are comfortable spending on a home. But that doesn't mean you have to spend more. It's a good idea to limit your home search to houses priced at an amount you can comfortably afford. Explore the mortgage amount that best fits into your overall budget by using Bank of America's Home Affordability Calculator.
Prequalification is an early step in your homebuying journey. When you prequalify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check.
Prequalification is also an opportunity to learn about different mortgage options and work with your lender to identify the right fit for your needs and goals.
Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the lender will verify the information you provide. They’ll also perform a credit check. If you’re preapproved, you’ll receive a preapproval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.
Expect surprises! Lenders look at every detail of your finances when granting preapproval. You might be asked about a car loan payment you made with a credit card, for example. Be prepared to answer lender questions as soon as they come up.
Getting preapproved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home.
Aside from their distinct roles in homebuying, prequalification and preapproval can take different amounts of time. Prequalifying at Bank of America is a quick process that can be done online, and you may get results within an hour. For mortgage preapproval, you’ll need to supply more information so the application is likely to take more time. You should receive your preapproval letter within 10 business days after you’ve provided all requested information.
| PREQUAL | PREAPPROVAL |
|---|---|
| Income information | Copies of pay stubs that show your most recent 30 days of income |
| Credit check | Credit check |
| Basic information about bank accounts | Bank account numbers or two most recent bank statements |
| Down payment amount and desired mortgage amount | Down payment amount and desired mortgage amount |
| No tax information required | W-2 statements and signed, personal and business tax returns from the past two years |
First-time homebuyers are more likely to find that getting prequalified is helpful, especially when they are establishing their homebuying budget and want an idea of how much they might be able to borrow.
Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.
Ready to prequalify, get preapproved or apply? Get started with the Digital Mortgage Experience.
| PREQUAL | PREAPPROVAL | |
|---|---|---|
| Benefits | You can start house-hunting knowing how much you might be able to borrow | You’ll be ready to make an offer with confidence—and gain a competitive advantage |
| Process | Provide basic information to a lender and quickly get a prequalification amount | After submitting documentation to a lender, you should receive a decision within 10 business days |
| Documentation | Answer questions for this process, plus a credit check | Provide proof of financial details, plus a credit check |
Learn more about home loans
Explore current rates and other financing options on our mortgage home page
As you look for a home, you may be asked to get prequalified or preapproved. Before you start, it’s important to understand the difference.
When you want to talk to a lender to establish a general range of home prices, you can get prequalified, which is simply a lender’s estimate of what you could potentially borrow.
This can be completed easily and conveniently online, in person, or over the phone in just a few minutes with basic information like your income and expected down payment.
When you want to give yourself a competitive edge over other buyers in the market, you can get preapproved. Having a preapproval lets sellers know that you already qualify for the home financing which greatly increases your chance of having your offer selected.
Unlike prequalification, preapproval is a more specific estimate of what you could borrow from your lender and requires documents such as your W2, recent pay stubs, bank statements and tax returns.
The lender will then use these documents to determine exactly how much you can be preapproved to borrow.
Once you’re preapproved, you’ll have 90 days to find a home you love. Then you can lock your rate and complete your application.
Whether you choose to get prequalified or preapproved, you will have a better sense of what’s in your price range and can hunt for a house with confidence.