Pre-Approval
A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Full Definition
A mortgage pre-approval is a lender's written commitment to loan a specified amount to a borrower, subject to a satisfactory property appraisal and no material changes in the borrower's financial situation. Pre-approval requires full documentation: income verification (pay stubs, tax returns), credit report pull, asset statements, and employment verification. It is stronger than pre-qualification, which is based on unverified self-reported information. Pre-approval letters are typically required by sellers before accepting an offer. Pre-approval is not a guarantee of final loan approval — the property must still appraise, and the borrower's financial situation must remain the same through closing.
Real-World Example
Before touring homes, a buyer submits pay stubs, tax returns, and bank statements to a lender, who issues a pre-approval letter for up to $450,000 at current rates.
How Pre-Approval Appears on the Real Estate Exam
Common question types, tested concepts, and what to watch out for
Know the difference between pre-qualification (unverified, informal) and pre-approval (verified, more reliable). Pre-approval is not a guarantee — final approval requires a satisfactory appraisal and unchanged borrower financials.
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