What does it mean to be "pre-qualified" for a loan?

Being "pre-qualified" for a loan means that the lender provides a preliminary assessment of what a borrower might qualify for based on limited financial information. This typically involves the borrower discussing their financial situation with the lender, including income, debts, and assets, which allows the lender to give an estimate of the loan amount the borrower is likely to obtain, depending on their creditworthiness and financial condition.

Pre-qualification is generally an informal process and does not involve a thorough credit check or a complete loan application. It serves as a helpful tool for prospective homebuyers to understand their borrowing potential and budget as they begin their property search.

While pre-qualification can be a useful step in the home-buying process, it does not guarantee loan approval nor provides the specifics of an actual loan amount. This distinguishes it from other processes like pre-approval, where a full application is submitted, and the lender commits to a specific loan amount provided the borrower's financial situation remains unchanged.