Preapproval is a lender's conditional commitment to lend you up to a specific amount, issued after actually verifying your finances — credit pull, pay stubs, tax returns, bank statements. The result is a preapproval letter you can wave at sellers.
Don't confuse it with prequalification, which is a quick guess based on numbers you self-report. Preapproval is the verified version, and that's exactly why listing agents care: an offer backed by a preapproval letter says "this buyer's financing is unlikely to blow up the deal." In a competitive market, that letter is table stakes.
A preapproval typically:
- States a maximum loan amount and expires after a set window, so the lender may re-verify if your search runs long
- Survives contact with reality only if your finances don't change — new car loans or job changes can void it
One more nuance: preapproval isn't a guarantee. Final approval comes after underwriting reviews the specific house and re-checks your file. And the bank's maximum is not your budget — lenders approve you to the edge of your debt-to-income ratio. Decide what payment you're comfortable with first; here's how much house you can afford.