Prequalification
Definition
Prequalification is an early estimate of how much you might be able to borrow and on what terms. It rests on information you supply plus a soft credit check, so it does not affect your credit score.
It is an indication, not an offer. The lender has not verified income, employment or the full credit file, and the terms after a formal application can differ.
Its value is comparison. Because a soft check leaves no mark, you can prequalify with several lenders and see estimated rates side by side before committing to one application.
The formal application that follows uses a hard inquiry, which is recorded on your credit file.