A pre-qualification is an initial assessment of your financial status that gives you a rough idea of how much money you may be able to borrow. It is usually based on a brief interview with a lender or a mortgage broker, and they will ask you about your income, debt, and assets to get a sense of your financial situation. However, a pre-qualification does not involve a thorough review of your credit history or income documents, so it is not a guarantee that you will be approved for a loan. It is simply an estimate of how much you might be able to borrow based on the information you provide.
On the other hand, a pre-approval is a more detailed and thorough evaluation of your financial situation. It involves submitting your income, assets, and credit history to a lender for a more comprehensive review. A pre-approval will typically involve a credit check, verification of employment and income, and a review of your financial documents, such as bank statements and tax returns. Based on this information, the lender will give you a more accurate estimate of how much money you can borrow, and may even provide you with a letter of pre-approval that you can use when making an offer on a home.
In short, a pre-qualification gives you a rough idea of how much money you may be able to borrow, while a pre-approval is a more detailed evaluation that provides you with a more accurate estimate of how much you can borrow. A pre-approval is usually preferred by real estate agents and sellers because it shows that you are a serious buyer who has already been vetted by a lender, making you a more attractive candidate for a mortgage loan.