Definition - What does Pre-Approval mean?
Pre-approval is when a lender approves a mortgage loan for a specific borrower before the person actually purchases a home. The pre-approval is based on credit score, income, and several other pieces of financial data. Once the pre-approval is given, it will hold as long as there are no major changes in credit score or income in the time it takes for the borrower to actually buy the home.
Justipedia explains Pre-Approval
An example of pre-approval would be a bank that pre-approves a man for a mortgage of $150,000.00 three months before he actually purchases a home. In this case, if the man goes forward with the purchase of the loan, he can use the pre-approved mortgage to help him pay for the home. That is, as long as his credit score has not gone down significantly in the three month period after he received pre-approval for the mortgage.
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