What Is the Definition of "Pre-Approval for a Home Loan"?

Smart homebuyers get preapproved for a home loan.

A preapproval for a home loan means a lender has given a preliminary OK for a homebuyer to borrow up to a certain amount of money. A preapproval is more secure than a prequalification, but isn't a final approval.

Preapproval Helps

A preapproval letter from a lender shows that the borrower likely can qualify for financing and gives the seller (and the realty agents) more confidence that the buyer will be able to close the deal. The preapproval also helps the buyer narrow in on the price range of home that he can afford to purchase.

Shop Around

Borrowers can shop around for a home loan before and after they receive a preapproval. It's a good idea to do so because lenders offer different loan programs, interest rates and fees.

Getting Preapproved

To obtain a preapproval from a lender, a prospective borrower usually must submit copies of paycheck stubs, W-2s, federal tax returns, bank statements and possibly other financial documents. A credit report is required as well.

References

• SmartMoney:7 Tips for Getting a Preapproved Mortgage
• LendingTree:Step 3 Mortgage Preapproval