Prequalification is often the first step in the home buying process. It involves providing some basic financial information to your loan officer who can then provide you with an estimate of the purchase price for which you may qualify. Often this information is provided in the form of a letter that you can give to your real estate agent and potential sellers to demonstrate you are a serious buyer with the ability to purchase a particular home.
Because a prequalification does not involve a thorough review and verification of your financial situation, it is non-binding and does not guarantee that your formal application will be approved. Nonetheless, it is a worthwhile exercise that is fast and free and can be done even if you do not have a specific property in mind.
It is important to note that you should contact your loan officer if your financial circumstances change after you receive your prequalification to determine what impact, if any, the changes may have on your prequalification.