West Virginia Mortgage Law Practice Test 2026 - Free Mortgage Law Practice Questions and Study Guide

Pre-approval in mortgage lending refers to a preliminary evaluation process that determines how much a borrower can borrow based on their financial situation. During this process, the lender assesses the borrower's credit score, income, debts, and overall financial health to provide an estimate of the loan amount for which the borrower qualifies. This gives borrowers a clearer understanding of their budget and strengthens their position when making an offer on a property since it indicates to sellers that the borrower has a commitment from a lender.

While ongoing assessments of a borrower’s financial health can occur during the life of a loan, pre-approval itself is specifically about establishing a borrowing limit based on initial documentation and qualifying criteria. Final agreements on loan terms come later in the mortgage process, after the borrower finds a property and the lender conducts further due diligence. Approval of the property being purchased is also part of the post-pre-approval phase, where the lender will look at the property appraisal and other factors but does not represent the initial pre-approval stage.