Is Pre-Approval binding?

Pre-approval is not a binding agreement. Instead, it serves as an initial assessment that indicates how much a lender is willing to lend to a borrower based on the borrower’s financial situation, including income, credit score, and debt-to-income ratio.

While it may provide the borrower with a sense of security and a clear understanding of their potential borrowing capacity, the pre-approval is often contingent upon further verification and specific conditions. The lender must still process the full application, conduct an appraisal, and perform due diligence on the property and borrower under a formal loan agreement, which means that the pre-approval can change or be revoked during the underwriting process.

With this in mind, the idea that pre-approval is binding does not hold true, as it doesn’t create a legal obligation to lend or accept a loan offer. As such, it is important for borrowers to recognize that pre-approval is only a preliminary step toward obtaining a mortgage loan, not a guaranteed commitment from the lender.