Pre-qualification is an informal estimate of how much you might borrow based on self-reported income and a soft credit pull — non-binding. Pre-approval is a lender's conditional commitment letter for a specific loan amount based on verified income and a hard credit pull.
These two terms are often used interchangeably in marketing but mean different things in practice. Pre-qualification: lender estimates your borrowing power from self-reported income, basic asset info, and (sometimes) a soft credit pull. Takes 2-5 minutes online. Non-binding. No credit-score impact. Used by personal-loan lenders, auto-loan lenders, and credit-card issuers to show 'expected rate' before formal application. Pre-approval: lender pulls hard credit, verifies income with W-2s/paystubs/tax returns, and issues a written conditional commitment letter for a specific loan amount. Takes 24-72 hours. Hard inquiry — costs 5-10 FICO points. Real document that real estate agents and sellers take seriously for mortgages, dealers take seriously for auto loans. For mortgages specifically, pre-approval is what you NEED before house-hunting. Pre-qualification carries no weight in competitive markets. The pre-approval letter typically has an expiration (60-90 days); after that, the lender re-runs credit + income verification. The Fair Credit Reporting Act (15 U.S.C. § 1681 — https://www.ftc.gov/legal-library/browse/statutes/fair-credit-reporting-act) governs when lenders can pull credit — pre-qualification soft pulls require no formal application, while pre-approval hard pulls require a written authorization. The CFPB's Owning a Home guide (https://www.consumerfinance.gov/owning-a-home/) explains the mortgage pre-approval process in detail.
Pre-qualify first to compare 2-3 lenders without credit impact. Then pre-approve with the winner (or the top 1-2) when you're ready to commit. For mortgages, pre-approval is the document sellers respect; pre-qualification is too informal.
Typically 60-90 days. After expiration, the lender re-runs credit + re-verifies income. If house-hunting drags past 90 days, plan on a refresh — don't apply for any new credit during that window because it can change your pre-approval terms.