finance
preapproval
A preapproval is a lender's conditional commitment to lend a borrower up to a stated amount after reviewing a loan application, credit report, and documentation of income and assets. It is stronger than a prequalification, which relies on unverified information. Final loan approval still depends on an acceptable appraisal, title review, and no major changes in the borrower's finances.
- Exam tip
- Preapproval is based on verified information; prequalification is an informal estimate. Neither guarantees final loan approval.
- Example
- A buyer submits pay stubs, tax returns, and bank statements and receives a preapproval letter for up to $425,000, making her offer more competitive.
Related terms & state variants
Sources
Source verification pending. Confirm current requirements with your state regulator.
Last verified: 2026-10-23