preapprove

Preapprove is a verb meaning to grant preliminary approval for a loan, credit line, or other financial product, contingent on further verification of the applicant's finances. A preapproval is usually expressed as a conditional offer rather than a final commitment.

In consumer finance, preapproval is most common for mortgages, auto loans, and credit cards. It involves an assessment of creditworthiness based on information provided by the applicant and available data, such as a credit report and income or asset documentation. Depending on the product, the check can be a soft inquiry or a hard credit pull.

Process and result: The applicant consents to a review, submits requested documentation, and the lender evaluates the data. If satisfied, the lender issues a preapproval decision or letter stating an estimated loan amount or credit limit, possible terms, and an expiration date, typically 60 to 90 days.

Limitations: A preapproval is not a guarantee of financing. Final approval depends on underwriting, an appraisal or value check (for a mortgage or auto loan), verification of income, and updated information. The terms offered at final approval may differ from the preapproval.

Credit impact and regional notes: Preapprovals can involve a credit inquiry; many lenders offer soft-pull preapprovals that do not affect credit scores, but some use hard inquiries. The availability and specifics of the process vary by country and lender.

In practice: Buyers often obtain preapproval to establish a budget and strengthen offers in competitive markets; sellers may require a preapproval letter to confirm seriousness. The process may be renewed or extended as circumstances change.