What “pre-approved” actually means, and what it does not

Three quite different documents get called “pre-approved” in ordinary conversation, and only one of them changes what a seller thinks of your offer. Knowing which one you are holding is worth more than almost anything else you can do in your first fortnight.

The three documents

1. Pre-qualification

You tell a lender your income, your debts and roughly what you have saved. They do arithmetic and hand you a letter. Nothing was verified. No credit was pulled, or only a soft pull that does not confirm anything. It takes about ten minutes and can be done entirely online.

This is genuinely useful — for you. It gives you a first bracket to think in. What it does not do is carry any weight in a negotiation, and a listing agent who has seen a hundred of these will spot it from the wording in the first line.

2. Pre-approval

The lender pulls your credit properly, collects pay stubs, W-2s or tax returns, and verifies your assets. An underwriter, or an automated underwriting system, issues a decision subject to conditions. The letter states an amount and usually an expiry date.

This is the one you attach to an offer. It says a lender has looked at your actual finances rather than your description of them.

3. Conditional loan commitment (sometimes “underwritten pre-approval”)

A full underwriter review of your file before you have a property, leaving only the property-specific conditions — appraisal, title, insurance — outstanding. Not every lender offers it and it takes longer to get.

It is the strongest thing short of cash. In a competitive situation it is often the difference between winning and coming second, because it converts your offer from “probably fine” into “this will close”.

What a listing agent actually looks at

When we receive an offer for a client who is selling, the letter is read in about fifteen seconds and four things are checked:

• Who wrote it. A local lender we have closed with before is worth more than a national call centre, because we can ring them.
• What it says was verified. “Based on information provided” means nothing was. “We have reviewed credit, income and assets” means something was.
• The date. A letter from four months ago tells us the buyer has been looking for four months and that the file is stale.
• The amount versus the offer. A letter for exactly the offer price is fine. A letter for $200,000 more tells the seller you have room, which is not information you meant to give away.

That last one is worth acting on: ask your lender for a letter written at your offer amount, not at your maximum. A good lender will reissue it in ten minutes.

What to ask your lender to send you

• A pre-approval letter that names what was verified.
• A Loan Estimate, so you can see the actual costs rather than a rate.
• A cash-to-close figure that includes closing costs, not just the down payment.
• Confirmation of how quickly they can close, in writing, if your timeline is short.

The part people get wrong afterwards

A pre-approval is not permanent. Lenders re-pull credit shortly before closing, and anything that changes your file can undo it: a new credit card, financed furniture, a car loan, a job change, or a large unexplained deposit. We have seen an approval withdrawn nine days before closing over a store card opened to save 10% on a sofa.

Between offer and closing, be boring on purpose. It is a strange few weeks and it is the whole job.

One more thing

Talk to at least two lenders. Rates and fees genuinely differ, and multiple mortgage credit enquiries inside a short shopping window are treated as a single enquiry by the major scoring models, so it does not damage your score the way people fear. We will introduce you to three, and we take nothing from any of them for it.