What is a Pre-Approval?

Pre Approval Article

A pre-approval is an estimate of the loan amount, type, and terms a potential borrower can qualify towards to buy a house.

Borrowers need to apply to receive a pre-approval. Mortgage lenders will verify a borrower’s income, credit score, assets, and debt-to-income ratio (DTI). Once all information is verified, your mortgage lender will provide you with a pre-approved loan estimate.

Pre-approvals are a great first step when home purchasing and hold more weight than a pre-qualification. A pre-qualification uses self-reported information to offer borrowers an estimate of how much money they can borrow. A borrower’s financial history is not verified in a pre-qualification.

A pre-approval letter allows borrowers to shop for homes more confidently. Lenders and sellers tend to be more confident in a borrower’s ability to purchase a property with a pre-approval letter. The loan amount, type, and terms offered in the letter also help real estate agents screen and show houses borrowers qualify towards—making home shopping organized and efficient.

Borrowers are advised not to use the entire estimated loan amount. They are encouraged to make an offer they can pay off and one within their budget.

For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.