What does a pre-approval letter indicate?

A pre-approval letter is a significant document in the home buying process, as it indicates that a lender has assessed the buyer's financial situation, including their creditworthiness, income, and debt, and has approved them for a mortgage up to a certain amount. This process often involves a preliminary review of financial documents and credit reports, allowing the lender to determine how much they are willing to lend to the buyer.

Thus, having a pre-approval letter demonstrates to sellers that the buyer is serious and financially capable of purchasing a home, which can give the buyer a competitive edge in the market. It does not, however, mean that an offer has been accepted, that a home inspection has been completed, or that a specific down payment amount is required, which makes the other choices less relevant in this context.