A mortgage prequalification is the very first step of home loan application process. Typical prequalification is issued by a loan officer and more than often based on ball park numbers which you provide, including salary and recurring expenses to estimate approximate maximum loan amount you may eventually be approved for. Your credit report is normally not pulled at this stage and no cost or obligation on behalf of either party is involved. So while a mortgage prequalification helps determine the dollar value of a potential loan, it is not by any stretch, a commitment to lend you money. A loan officer can’t make an approval in any shape or form, but give you a prequalification letter which you can use when making an offer on a property. Often such letters are called a conditional preapproval. It states something along these lines,

This letter is to prequalify Mr. and Mrs. Smith for a home loan not to exceed $200,000 at 5% mortgage interest rated based on 30-year amortization. Final approval depends on buyers credit, down payment, property appraisal and other factors.

A mortgage loan preapproval is done by an underwriter upon verification of your credit, down payment, work history, salary and liquid assets. Preapproval basically means that you are fully qualified to buy a property as long as the appraisal of its value meets a lender criteria and nothing drastically changes with your situation. If your loan is preapproved, you will get a preapproval certificate. It helps you to close much faster on the purchase once you find a property. Some lenders allow locking your interest rate once you are preapproved. In today housing market, mortgage preapproval could help you negotiate the price down.

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