Mortgage prequalification

Prequalification is an informal lender estimate of how much a borrower might qualify for, typically produced from a phone or online conversation where the borrower self-reports income, debts, and credit. The lender doesn't pull credit, doesn't verify documentation, and produces a letter stating "you may qualify for up to $X."

How it works: the borrower describes their financial picture, the lender feeds the numbers into a simple ratio calculator, and a letter comes back with an estimated loan amount. The whole process can take 15 minutes online. The conversation is one-way, the lender accepts the borrower's stated numbers without asking for proof.

Why it matters: prequalification is useful as a first orientation. A borrower wondering whether they can afford a $500,000 home or a $700,000 home can get a rough answer in minutes. It's a starting point for the homebuying conversation, not a serious commitment from the lender.

Common gotcha: prequalification letters are often misread as carrying real weight. They don't. Most listing agents in competitive markets won't take a prequalification-only offer seriously; sellers want to see preapproval at minimum. The terms get used interchangeably by some lenders, which adds confusion, the operative question is whether the lender pulled credit and verified the documentation. If they didn't, the letter is prequalification regardless of what the lender called it.