Mortgage Glossary
Pre-Approval
A lender's written commitment to lend you up to a specific amount, based on a review of your income, credit, and assets.
What It Means
A pre-approval is a formal evaluation by a lender that determines how much mortgage you qualify for. Unlike a pre-qualification (which is a quick estimate), a pre-approval involves verifying your actual documents.
The lender reviews:
- Credit score and history
- Income and employment (pay stubs, W-2s, tax returns)
- Assets and savings
- Debt-to-income ratio
A pre-approval letter shows sellers you're a serious, qualified buyer — and it's essentially required in competitive markets. Pre-approvals typically last 60–90 days.
Getting pre-approved does NOT mean you're obligated to borrow — it just shows your buying power.
Real-World Example
"You apply for pre-approval with a lender. After reviewing your documents, they issue a letter stating you're approved for up to $425,000. You can now confidently shop for homes in that range."
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Definitions are for educational purposes only and do not constitute financial or legal advice.