What does a pre-approval letter provide the borrower?

A pre-approval letter is a critical document in the mortgage process, as it gives the borrower a verified assurance of creditworthiness and available funds. When a lender issues a pre-approval letter, they have reviewed the borrower's financial information, including credit score, income, debts, and assets, to determine how much money the borrower can borrow and the terms of that mortgage. This formal assessment means that the lender has confirmed the borrower’s qualifications based on the information provided, allowing the borrower to shop for homes with confidence, knowing their borrowing capacity.

In contrast, other options such as detailing a payment schedule or providing estimates of closing costs are not typically included in a pre-approval letter. While general interest rates may be discussed, they can fluctuate and are not guaranteed in a pre-approval, which mainly focuses on the borrower’s ability to secure financing. Therefore, the assurance of creditworthiness and available funds stands out as the primary purpose of a pre-approval letter.