Prequalification vs. Preapproval: What's the Difference?

As mortgage rates edge lower, the Oahu real estate market is expected to become even more competitive for buyers. As lower rates attract greater buyer interest, demand for homes and condos increases across the island. In this fast-moving environment, homebuyers need to be prepared and informed to gain a competitive advantage. One of the best ways to strengthen your position as a buyer is to understand the difference between getting prequalified and being preapproved for a mortgage. Having this knowledge will empower you to move more confidently when making an offer in an aggressive market.

What Does it Mean to be Prequalified?

Prequalification is typically the first step in the mortgage process and gives buyers an estimate of what they can reasonably afford. The prequalification process is straightforward and requires only basic financial details like income, debts and assets. Getting a prequalification will give you an idea of your potential borrowing power without undergoing a thorough financial check. However, since the lender doesn’t review your full financial history, the loan amount you’re prequalified for is just an estimate, not a guaranteed offer.

What is Preapproval?

On the other hand, preapproval involves a deeper dive into your financial situation. A lender will assess your credit score, verify your income and evaluate your financial background. The preapproval process results in a more accurate estimate of your approved loan amount. You’ll also get a preapproval letter, which can be a game-changer when submitting offers in a competitive market. Homebuyers who are preapproved are often seen as more serious and reliable, making them more attractive to sellers.

Educate Yourself on the Homebuying Process

The homebuying process can feel overwhelming, especially for first-time homebuyers and buyers who are new to Hawaii’s unique real estate market. That’s why Locations offers regular in-person First-Time Homebuyer Seminars designed to guide buyers through every step of purchasing a home, from understanding the market to navigating financing options. Lenders from Hawaii Mortgage Group (HMG) are also on-hand at our seminars to explain the mortgage process in greater detail. Whether you're curious about how much home you can afford or what steps to take next, this seminar is the perfect opportunity to gain the knowledge you need.

Find an Experienced Lender

Once you're ready to take the next step, the experts at Hawaii Mortgage Group can simplify the process of getting prequalified or preapproved. Their online tools allow you to start the mortgage process quickly and efficiently, ensuring you're prepared to act swiftly when you find the right home. With prequalification or preapproval, you can strengthen your position in Oahu’s competitive real estate market. Visit Hawaii Mortgage Group's website to begin the prequalification or preapproval process and be prepared to take on the homebuying process with confidence!