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The act or process of determining the approximate amount a borrower will be able to borrow before he/she actually applies for a loan. Prequalification looks at the borrower's current income and debt to make this determination. Prequalification is most common with mortgages. Because the borrower has not applied for the loan, it is not a guarantee of approval, but is rather an estimation. See also: Pre-approval.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


When you prequalify for a mortgage, the lender calculates the approximate amount you'd be able to borrow, based on your current income and debt.

Many lenders offer free mortgage calculators -- sometimes called prequalification calculators -- on their websites to help you estimate how large a mortgage you'd be approved for.

Since you don't complete a mortgage application or provide financial details, prequalification is not a guarantee, and simply helps you determine how much you should plan to spend on a home. But before you're approved for a mortgage, you'll have to go through the mortgage application process, including a credit check, and provide financial documentation.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
According to sources and available documents, the staff of Parks Division did not undertake prequalification bids of the applications prior to issuing contracts and favoured the favourites, causing a loss of millions of rupees to the civic agency, which is reeling under financial woes.
18 July 2014 - US Daktari Diagnostics Inc said Friday that its point-of-care (POC) diagnostic platform, Daktari CD4, had been accepted into the Prequalification of Diagnostics Programme within the World Health Organization (WHO).
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Novartis said it worked closely with WHO under its procedure for evaluating pandemic flu 2009 vaccines to ensure rapid prequalification.
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One might even make the case that the great ones begin their preparation for negotiations during their prequalification review.
9, Prequalification Education, Tests of Professional Competence and Practical Experience of Professional Accountants.
The prequalification program will remain in its pilot stage until officials are sure that it meets its objective of helping women create viable ventures.
Prequalification is the art of balancing risk characteristics with company appetite, not "yea" or "nay" based on expiring premium.