Pre-qualification is an initial step in the loan approval process where a lender evaluates a potential borrower's creditworthiness based on self-reported financial information. This process involves a basic review of the applicant's income, debts, assets, and credit history to provide an estimate of the loan amount for which they might qualify. Pre-qualification is typically a quick and informal process that does not affect the borrower's credit score, as it usually involves a soft credit check. The outcome is a preliminary assessment, giving borrowers an idea of their borrowing power and helping them understand their loan options. While pre-qualification is not a guarantee of loan approval, it is a useful tool for planning and negotiating in the home-buying process or other major financial decisions.
