Pre-Qualification

AAA

DEFINITION of 'Pre-Qualification'

An initial evaluation of the credit worthiness of a potential borrower that is used to determine the estimated amount that the person can afford to borrow. Pre-qualification is a relatively simple and quick process of examining the potential borrower's income and expenses in order to generate an estimated borrowing range that they would likely be able to repay to the lender.

INVESTOPEDIA EXPLAINS 'Pre-Qualification'

It is important to note that the pre-qualification amount is not a guaranteed amount that would be receive from a financial institution if you applied for a loan but is simply an estimate, which can be used to gain an idea on what a person can afford to purchase. The pre-qualification process doesn't include a more thorough look into the credit worthiness of the borrower, such as accessing your credit report or score.

Pre-approval is a more in-depth assessment of the amount that a person can afford to borrow and is done by a financial institution that will state the maximum amount that it would lend to the borrower.

RELATED TERMS
  1. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  2. Credit Report

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

    The act of giving money, property or other material goods to ...
  4. FICO Score

    A type of credit score that makes up a substantial portion of ...
  5. Pre-Approval

    An evaluation of a potential borrower by a lender that determines ...
  6. Fullz

    A slang term that criminals who steal credit card information ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Options & Futures

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for home buyers.
  5. Savings

    Why Do Credit Cards Expire?

    Credit cards expire for more reasons than you could imagine – including, so you don't forget you have the card.
  6. Credit & Loans

    Meet The Company Behind Your FICO Score

    There are other credit scores that evaluate lending risk, but FICO is still the choice of most U.S. lenders.
  7. Stock Analysis

    How MasterCard Likely Earned a Spot in Your Wallet

    An in depth look at MasterCard and its future prospects as an investment.
  8. Credit & Loans

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.
  9. Credit & Loans

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  10. Credit & Loans

    Barclaycard Arrival Plus World Elite Master Card

    Should you pay the annual fee (waived the first year) for this rewards travel card? See how it compares.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center