What does "pre-qualification" entail when applying for a mortgage?

"Pre-qualification" refers to a preliminary assessment that gives potential borrowers an estimate of how much money they might be able to borrow for a mortgage, based on informal criteria. This process typically involves the lender gathering basic financial information from the applicant, such as their income, debts, and credit score, through a conversation or an application form. Since this information is usually not verified at this stage, the pre-qualification is merely an estimate and does not constitute a formal loan commitment.

This process helps borrowers understand their financing options and guides them in their property search by providing a rough idea of their affordability. It is a crucial first step in the mortgage process, allowing borrowers to gauge where they stand financially before moving forward with a formal loan application.