Preapproval
A written statement from a lender that they've reviewed the buyer's documents and credit and are willing to lend up to a certain amount. Sellers usually want to see one with an offer.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
A preapproval letter says a lender has actually looked at the buyer's finances; a prequalification says less. Comparing offers on the strength of the financing is comparing these letters.
Part 2 of 4
A simple example
Two financed offers at $300,000. One carries a preapproval from a local lender who has verified income and credit; the other a prequalification from a website. The first is a stronger offer at the same price.
| The letter | What the lender actually did |
|---|---|
| Preapproval | Pulled credit, read pay stubs and bank statements, named a ceiling |
| Prequalification | Took the buyer's word for the numbers |
| Loan commitment, later | Underwrote the whole file and approved the loan |
A preapproval is a lender's opinion after looking. A prequalification is an opinion without looking.
Part 3 of 4
What people get wrong
That a preapproval is an approval. The loan is not approved until underwriting says so, weeks later.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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