A conditional commitment from a lender for a specific mortgage amount and rate, valid for a set period.
A pre-approval involves a credit check, income verification, and rate hold (typically 90-120 days). It tells you the maximum you can borrow and locks in a rate while you shop for a home. If rates go up during your rate hold, you keep the lower rate. If rates go down, you get the lower rate. A pre-approval is not a guarantee of final approval, as it is subject to the property appraisal and a review of your financial situation at the time of the firm offer.
Related terms: Mortgage Stress Test | Qualifying Rate