How Important Is

You sometimes will hear the terms 'pre-qualify' and 'pre-approve' being used interchangeably. But in fact, there are big differences between being pre-qualified for a mortgage and pre-approved for a mortgage. 

Being pre-qualified for a mortgage essentially means the you've made an online application for pre-qualification. Generally speaking, you have provided your income, your debts, your assets and have requested a credit report be run. We'll then review your credit history, compute your debt-to-income ratio based on the information provided and then give you a nod to pre-qualification. This pre-qualification is subject to all information being verified and found satisfactory to a lender. This is where potential problems will usually occur. For instance, if you provided information about your income that seemed right, but the lender calculates the income a different way (usually in the case of self-employed or commissioned individuals), the income will not hold up and the loan can possibly be rejected.

Or, let's say you provided a dollar amount to be used for down payment and closing costs but you don't actually have the cash. Perhaps you've been promised a gift from your parents. You might think the money would simply be counted as yours, but the lender doesn't accept gifts as a source of funds.