What is Pre-Approval?
What is Pre-Approval and why is it a good thing?
Pre-approval is a letter stating that the lender guarantees that the borrower can borrow up to a certain amount. To get this, you must provide an application to your lending institution.
A pre-approval has many benefits. First, it tells you how much money you can borrow so you don't shop for properties
outside your price range. Second, it gives you peace of mind that you have the loan locked in as you go preview potential new homes. Third, providing the
pre-approval letter with your offer to the seller shows that you are serious and can fund the transaction if the offer is accepted.
While getting the pre-approval, you may also apply for a rate lock, where the lender commits to a specific interest rate on the loan if you close within a certain period.
PS. Don’t confuse pre-qualify with pre-approval: Pre-qualify is simply a lender's informal estimation of how much you can borrow. It is not an official promise.
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