Pre-Approval
A lender's preliminary commitment to lend you a specified amount, based on a review of credit, income, and assets.
A pre-approval is stronger than a pre-qualification. It involves a credit pull, documented income (pay stubs, W-2s, sometimes tax returns), and documented assets (bank statements). The lender issues a pre-approval letter stating the loan amount, program, and any conditions outstanding.
Sellers and listing agents take pre-approvals seriously, they signal a serious buyer whose financing is unlikely to fall through. Many sellers in competitive markets will only entertain offers backed by a pre-approval letter, and stronger pre-approvals (especially fully underwritten ones) often win competing bids.
A pre-approval letter is typically valid for 60–90 days. Major financial changes during that window, quitting a job, opening new credit, taking on additional debt, can invalidate the pre-approval, so it's smart to coast on autopilot until closing.
Related terms
Other terms you'll see alongside Pre-Approval
An informal estimate of how much a lender might let you borrow, based on self-reported information without document verification.
A formal written agreement from the lender promising to fund a loan, subject to specific conditions.
A lender's review of your credit report and score to assess your willingness and ability to repay debt.
The standardized three-page disclosure a lender must provide within three business days of a complete loan application.
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