Buying a house is a significant milestone, especially if it’s your first home. For most people, the first step isn’t house hunting—it’s figuring out how much you can afford. Getting a rough estimate of what a lender might let you borrow is key to narrowing your home search. That’s what a mortgage prequalification does.
In this guide, we’ll walk you through how to prequalify for a mortgage, what you need to prequalify, and how it’s different from preapproval. By the end, you’ll know how to confidently take the first step toward homeownership.
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What is a mortgage prequalification, and what does it tell you?
Mortgage prequalification is an early step in the homebuying process that gives you an estimate of how much a lender may be willing to let you borrow. It’s like getting a snapshot of your home-buying power.
During prequalification, you’ll provide the lender with basic information about your current financial situation. This can include things like your income, employment history, existing debts, and cash saved for a down payment. Based on this information, the lender gives you a rough estimate of what loan amount you might qualify for.
Here’s what a prequalification tells you:
- How much house you can likely afford
- Whether your current finances are strong enough for a mortgage
- What loan types and terms might be available to you
Keep in mind that a prequalification isn’t a guarantee because the lender is providing an estimate without verifying your information. Still, it’s a perfect starting point that gives you an idea of how much house you can afford.
The difference between prequalification and preapproval
Prequalification and preapproval are two mortgage terms often thrown around interchangeably, but they’re completely different. Understanding the difference between them can help you know when each makes the most sense.
Prequalification is a quick, informal estimate based on the financial information you provide. It usually takes a few minutes and doesn’t require a credit check or documentation for verification.
A preapproval is a more in-depth process that takes days to complete. The lender verifies everything, from your income to assets, employment, and credit history. They’ll pull your credit report and review your pay stubs, tax returns, and bank statements. You’ll get a preapproval letter that outlines the mortgage you qualify for, including the interest rate, monthly payments, and term.
If you want to get an idea of how much house you can afford, prequalification is a good place to start. But if you’re actively house hunting and ready to make offers, a preapproval letter will show sellers you’re a serious buyer. Learn how long it takes to get preapproved for a mortgage.
Will prequalifying hurt my credit score?
No, prequalifying for a mortgage won’t hurt your credit score. This is because most lenders run a soft credit inquiry that will appear in your report but doesn’t impact your score. However, always ask upfront whether they'll be doing a hard or soft credit pull.
Once you proceed to preapproval, lenders will perform a hard credit inquiry, which might lower your credit score by a few points. But don’t let this alarm you. Credit scoring models treat multiple inquiries within a short window (usually 14–45 days) as a single inquiry, so you can shop around without hurting your credit too much.
When to start the prequalification process
Timing is everything in real estate, and starting the prequalification process at the right moment sets you up for success.
You may want to start the prequalification process six to 12 months before you become serious about house hunting. This will give you time to address any issues that may help you qualify for better rates and terms, like improving your credit score, paying down debt, or saving for a bigger down payment.
For most buyers, the “right time” to start the prequalification process is when:
- You've saved enough for a down payment.
- Your income has been stable for at least two years.
- You've paid down high-interest debt or have a plan to do so.
- You're emotionally and financially ready to commit to homeownership.
Don’t wait until you find your dream home to start the process. Whether you’re earning a $50,000 or $90,000 salary, starting early gives you a realistic budget for your home search.
What you need to prequalify for a mortgage
To prequalify for a mortgage, you’ll need to share your financial information with your lender. While you don’t need to submit any paperwork, you should have this information handy when submitting your application:
- Your income: This includes your gross monthly or annual income from your job, side gigs, or other sources.
- Existing debts: Know what you owe on credit card balances, car loans, student loans, etc.
- Estimated credit score: Use a free credit monitoring service or your credit card issuer’s app to check your credit score.
- Down payment amount: How much are you willing to put down toward the home purchase?
- Assets: This includes checking and savings account balances, investment accounts, and retirement accounts.
- Employment information: You’ll need to share your job title and the length of time in your current position.
The more accurate your information is, the more reliable your prequalification estimate will be. So, be as honest as possible when providing these details.
How to prequalify for a mortgage
Here’s how to start the prequalification process:
Choose a lender
Pick two to three lenders, which can be your bank, credit union, or online lender.
Gather your financial information
Before you contact lenders, you need to gather your basic financial information. Be sure you have everything handy to make the process smoother.
Contact lenders
Most lenders offer online prequalification tools, which means you can get an estimate within minutes of submitting your financial details. You may also talk to a loan officer over the phone, especially if you need clarification over specific things.
Provide accurate information
When submitting your information, be honest about your income, debts, assets, and employment. Being accurate now saves you from disappointment later and helps you set realistic expectations from the start.
Review your estimates
Mortgage lenders will give you loan estimates based on the information you share. Compare loan amounts, interest rates, and monthly payments across lenders. Remember, these are informal estimates, which may change during preapproval.
Get it in writing
You can request a prequalification letter. While it’s not as powerful as a preapproval letter, you can use it to create your action plan. Set your house hunting budget, preferably 10–15% below your maximum loan estimate. Identify areas where you can improve your financial position. Finally, choose your preferred lender for the preapproval process.
The entire process typically takes 30 minutes to an hour per lender, and you can often complete it the same day you decide to start.
Next step: Don’t stop at prequalification
Prequalification is a great first step in your home-buying process. Your immediate next steps should focus on improving your financial situation as you prepare for preapproval. If prequalifying revealed a lower loan estimate than expected, use this time to increase your down payment, improve your credit score, and reduce debt.
You may also want to consider creating a home-buying checklist before you start house hunting. This includes researching neighborhoods you’d like to live in, knowing your mortgage loan options, and comparing lenders. Once you’re ready, get preapproved for a mortgage, then go out and find your dream home.