A letter from a lender or broker that confirms they’ve reviewed a buyer’s finances and are willing to lend a specific amount of money to buy a home. It tells the buyer how much he or she can afford. Getting pre-approved does not a guarantee a loan. To process a pre-approval application, a lender will check the buyer’s credit report and verify employment history, income, and down payment amount. Full review of the pre-approval application can take 12–24 hours. In markets with multiple offers, it’s important to be pre-approved during the touring process so buyers can act quickly and put in a competitive offer when they find the right place. Home sellers expect buyers to be pre-approved since there’s less risk that the deal will fall through due to financing.
Pre-approval is different than pre-qualification, which is an informal process to figure out how much a borrower can afford.