Pre-Approval

AAA

DEFINITION of 'Pre-Approval'

An evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan from the lender, or the maximum amount that the lender would be willing to lend. The pre-approval process involves a thorough look into the income and expenses of the borrower, including a look at the borrower's credit report and score.

INVESTOPEDIA EXPLAINS 'Pre-Approval'

The pre-approval process involves a confirmation of income and a credit check on the borrower. As long as no major income or credit changes occur between the time of pre-approval and the actual purchase of a home, the dollar amount of pre-approval can be expected to remain the same. The process may take anywhere from a few minutes (for an online lending application) to a couple of weeks. A nonrefundable fee may be charged for the process.

A pre-approved mortgage is still subject to review once a specific property has been chosen, so the dollar amount is not guaranteed. A pre-approval may be lowered or even revoked if the property in question may be difficult to resell in the real estate market due to preconditions, location and other factors.

RELATED TERMS
  1. Loan

    The act of giving money, property or other material goods to ...
  2. Credit Report

    A detailed report of an individual's credit history prepared ...
  3. FICO Score

    A type of credit score that makes up a substantial portion of ...
  4. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  5. Pre-Qualification

    An initial evaluation of the credit worthiness of a potential ...
  6. Retail Credit Facility

    A financing method which provides loan services to retail consumers ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  3. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  4. 10 Worst First-Time Homebuyer Mistakes
    Home & Auto

    10 Worst First-Time Homebuyer Mistakes

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center