The full explanation
Lenders use the two words differently: some issue a prequalification based on information you report, without verifying it, and only issue a preapproval after reviewing your documents; others use the words the other way around or interchangeably. That is why it pays to ask what the letter is based on. Sellers often ask for one before accepting an offer.
An example
Before touring homes, Mario asks two lenders for a preapproval. With the letter he knows how much he can offer and the seller takes him seriously.
You will see it in…
- The letter the lender gives you after reviewing your application
- Purchase offers, where the seller asks to see the letter
- Lender advertising (“preapproval in minutes”)
