Pre-Approval

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. Do inquiries for preapproved offers affect my credit score?

    Inquiries for a preapproved offer do not affect a credit score unless a person follows through with the actual application. ... Read Full Answer >>
  2. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  3. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  4. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  5. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  6. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
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