Prequalification

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Prequalification

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

Prequalification.

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 ?
Summary: Gubre Fabrikalari, a Turkish fertiliser producer: Says prequalifies to participate in Tunisian mining tender, worth up to 2 billion dinar ($1.48 billion), and will decide whether to bid.
Gubre Fabrikalari, a Turkish fertiliser producer:AaSays prequalifies to participate in Tunisian mining tender, worth up to 2 billion dinar ($1.48 billion), and will decide whether to bid.