What Does It Mean to Be Pre-Approved for a Mortgage?
Getting pre-approved for a mortgage means that the lender has reviewed your credit scores and other financial information and has committed to loan you a certain amount. Pre-approval enables you to get a mortgage more easily and provides you an advantage as a borrower. The lender will inform you how much they are willing to lend to you and provide you with a pre-approval letter, which can help you confirm your decision to apply for and take out a loan with that lender.
The pre-approval process normally makes a hard credit inquiry, while the pre-qualification stage may trigger a soft credit inquiry.
A soft credit inquiry has no impact on your credit score. The soft credit inquiry consists only of a preliminary search of your credit history. The lender will access limited credit information and make an initial decision as to whether to grant you pre-approval.
A hard credit inquiry allows a lender to take a look at your entire credit history. It requires a person's permission, and it typically occurs during the mortgage application process. The lender can make a decision with respect to qualification based on your credit report and credit score. Hard credit checks leave a record in your report, and it can negatively affect your credit score.
Pre-approval does not guarantee that you will receive a specific interest rate or loan terms from the lender. These aspects of the loan will be determined by further investigation of your records as well as current interest rate market trends. Pre-approval is simply the lender agreeing to loan you a certain amount, with uncertain terms.