Pre-approval
Encyclopedia
In lending, pre-approval has two meanings:
1. The first is that a lender, via public or proprietary information, feels that a potential borrower is completely credit worthy enough for a certain credit product, and approaches the potential customer with a guarantee that should they want that product, they would be guaranteed to get it. This rarely happens in the financial services industry, and when it does happen, it is usually loaded with fine print
that is not immediately disclosed. Usually, what happens is pre-qualification
, instead.
2. The second meaning has to do with mortgage lending. People interested in buying a house can often approach a lender, who will check their credit and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. Buyers can then get a letter of pre approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided.
1. The first is that a lender, via public or proprietary information, feels that a potential borrower is completely credit worthy enough for a certain credit product, and approaches the potential customer with a guarantee that should they want that product, they would be guaranteed to get it. This rarely happens in the financial services industry, and when it does happen, it is usually loaded with fine print
Fine print
Fine print, small print, or "mouseprint" is less noticeable print smaller than the more obvious larger print it accompanies that advertises or otherwise describes or partially describes a commercial product or service...
that is not immediately disclosed. Usually, what happens is pre-qualification
Pre-qualification
Pre-qualification is a term of art in retail finance, and means that a loan officer has taken some information from the borrower, and made a tentative ....
, instead.
2. The second meaning has to do with mortgage lending. People interested in buying a house can often approach a lender, who will check their credit and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. Buyers can then get a letter of pre approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided.