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What is a Mortgage Pre-Qualification Letter?
Once a borrower has determined how much they want to spend on a mortgage, it is usually encouraged that they next get either a pre-qualification letter or a pre-approval letter from a mortgage lender before looking for a property to purchase.

Although both letters serve a similar function-they indicate how much a borrower will have available for a home loan-they differ in terms of the borrower and the lender's commitments to a loan.

A pre-qualification letter is an estimate of what a lender thinks a borrower can get for a mortgage, as where a pre-approval letter (as its name implies) is a lender's approval of a loan (including how much can be borrowed and at what interest rate and term).

While there is typically no cost for the letter, some institutions can charge a fee of up to $100.00 for the letter. This cost can be credited towards the cost of the loan if/when the transaction closes.

Since the letter does not require a credit report and the information provided by the borrower is not verified, it lacks the authority and power of a pre-approval letter.

Still, it is a valuable tool for borrowers because it helps them continue sharpening their focus on getting the right mortgage that meets their budgets and the best available home in their price range.

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