In general, to pre-qualify is about passing or meeting an initial criteria or requirements before getting other opportunities opened up to such a person.
The borrower is typically asked for their social security number or another identifier, together with proof of their employment, income, and assets, which is weighed against the monthly payments being made on their current debts.
Based on this initial information, a maximum loan amount will be determined according to a standard Debt-to-income ratio (DTI).
If a refinance is involved, monthly debts that are being consolidated are not taken into consideration, because they are built into the DTI by way of the new loan amount payment.
Other factors included in determining the buyer's pre-qualification status, besides the basic DTI issue, are: monthly gross disposable income, the number of open credit lines the buyer has, and assets.