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As the term implies, a pre-approval is an initial evaluation of a homebuyer’s borrowing qualifications. This is used to determine whether someone might get approved, as well as the maximum amount they might be approved for.

Spy Tip: A pre-approved mortgage is always subject to lender conditions. If you’re putting down less than 20%, a pre-approval should never be a substitute for inserting a financing condition in your purchase agreement. That’s because insurer approval is required and insurers never review pre-approvals. Insurers may later decline an applicant for any number of reasons, despite the lender’s approval.

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