Prequalify Definition

A potential borrower is said to prequalify for a loan of a certain amount if the loan has been approved but not yet taken. For example, a homebuyer might prequalify to obtain a mortgage of up to $400,000 before beginning to look for a suitable home; if a home is found at any price less than $400,000, the homebuyer will be able to obtain financing. A prequalified homebuyer is attractive to a seller because they will be sure to obtain financing.