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The preliminary assessment of a prospective borrower’s finances to determine if he or she meets the requirements for loan approval.


Qualification is the preliminary assessment of a prospective borrower’s finances to determine if he or she meets the requirements for loan approval. Also called prequalification, it refers to a non-binding process in which prospective borrowers provide preliminary information concerning income, debts, assets and credit to lenders. The lenders perform some calculations and estimate the size of loan they would likely approve.

Qualification Explained

Qualification is the process of determining if you have enough cash and income to meet the requirements of a particular lender for a loan you want. Qualification is not an approval because it does not include your credit history and it may not involve verifying your financial information. Qualified borrowers can still be turned down if they have a poor credit history or if their financial information does not check out.


Pre-qualification is a common first step of the mortgage process. It involves contacting a lender and providing some basic financial information in order to find out the mortgage amount for which you qualify.

Prior to even contacting a real estate agent and looking at homes, it is a good idea to begin qualification, so you have an idea of how large of a loan you can get. This, in turn, tells you the price point of the houses that you can afford. Once you know that, you’ll know what neighborhoods and markets to look in.

​The Process

Qualification is a fairly easy process. You start by contacting a lender. The lender will want some basic financial information about you: Your income, assets and current debt. For qualification, the lender does not verify this information but simply trusts that what you are providing is accurate. As a result, qualification is not binding. In fact, someone who is qualified can even find that s/he gets turned down for a loan because of his/her credit history or other factors. It is not until the next step, approval, that the lender makes a binding agreement with the borrower. With approval, the lender actually verifies the information and looks at your credit report.

Despite the fact that qualification does not actually guarantee a borrower a loan, it is still useful. With qualification, you can find out how much loan you can afford, which helps you to determine the cost of the house you can buy and, also helps show you what your down payment should be. It also gets the approval process started.