A pre-approval letter from a mortgage lender indicates that the lender has reviewed a buyer’s finances and will approve them for a home loan of a certain amount, pending final review of their finances and the property being purchased.
Obtaining a pre-approval from a lender involves submitting financial details like social security number, paystubs, bank statements and tax returns. Lenders will verify income, debt and payment history before issuing a pre-approval.
A pre-approval letter is a critical piece of bidding on a home. This document is provided to a home seller to prove that you are qualified and able to close on the real estate purchase you are trying to make.
A pre-approval is different from a pre-qualification because financial information is researched and verified.