Prequalification vs. preapproval

The terms can vary by lender

Prequalification and preapproval both describe an early assessment of financing. Some lenders use prequalification for an initial estimate based on information you provide and preapproval for a more detailed review. Others use these terms differently. The label alone does not tell you how much has been verified.

Ask what has been reviewed

Find out whether income, assets, debts and credit have been verified, whether an underwriter has reviewed the file and which conditions remain. Ask whether the credit review involves a soft or hard inquiry and when another review may be needed.

Sam can explain the review behind your letter and help you choose a payment range that reflects taxes, insurance and other housing costs, rather than focusing only on a maximum purchase price.

Understand the limits of a letter

A letter can help show a seller that you have started the financing process. It is not a guarantee of final approval, a rate lock or a commitment to lend. The property, documentation and your financial situation still need to meet applicable requirements.

Ask when the letter expires and what changes require an update. New debts, employment changes or large account transfers can affect the review. Check with Sam before making financial changes during your home search.