What does pre-approval indicate about a borrower?

Pre-approval indicates that the lender has taken steps to verify the borrower's financial situation, including their creditworthiness and funds available for a down payment. This process typically involves a thorough review of the borrower's credit report, income statements, and other financial documents that demonstrate their ability to repay the loan. As a result, obtaining pre-approval gives both the borrower and the seller confidence in the borrower's capability to secure financing for a property.

This stage is crucial for borrowers because it not only aids them in determining how much they can afford to borrow but also enhances their standing in a competitive real estate market. Sellers often view pre-approved buyers as more serious and capable, thus increasing the likelihood of a successful purchase agreement.