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For many of us, buying a home represents one of the biggest financial transactions we’ll ever make. While the homebuying process might seem intimidating, there are some simple steps that make it easier. One of the most important steps is what’s known as pre-approval.

Pre-approval will help you immensely when you’re searching for a home. It might even give you an edge on the competition once you’re ready to make an offer.  In a competitive market, some sellers won’t even entertain offers from buyers unless they have a pre-approval letter in hand.

So what exactly does it mean to be pre-approved for a mortgage?

What It Means

To be pre-approved for a mortgage means that a bank or lender has investigated your credit history and determined that you would be a suitable candidate for a mortgage. (If you want to see where your credit currently stands, the free Credit Report Card grades your credit history on the basics and also provides two free credit scores.) Pre-approvals might only be good for a certain amount of time but they usually signify that a lender is ready and willing to lend you money. It’s a big step in showing sellers that you are serious about buying a house and that your offer should be treated accordingly.

What It Involves

Getting pre-approved is a somewhat lengthy process. But at the end of it all you’ll know whether you can buy a home or not. The process starts before you even find a home. First, you’ll need to go to a lender and complete a mortgage application and provide documents related to your financial history. The bank or lender will then do a thorough investigation into your finances in order to determine how much money they are willing to loan you.


At the end of the pre-approval process, you should be given an exact loan amount. This allows you to look for homes at that price point or lower. At this point, you’ll also have a good idea of the interest rate you’ll be given at the end of the pre-approval process.

The real benefit of getting pre-approved is that when you find a place you’ll be able to move quickly. Once you make an offer, you won’t have to scramble for financing since you’re pre-approved.

Pre-Qualified vs. Pre-Approved

You may have heard the term pre-qualified in the past and assumed that it was the same thing as being pre-approved. Although similar, they are actually two different things. Getting pre-qualified involves sitting down with a lender in order to get an idea of how much money you can borrow. But it is only informational.

You would supply the lender with data such as your income, assets and debts and the lender would give you an idea of how much you can borrow, what type of mortgage options there are, etc. A lot of people make the mistake of thinking that pre-qualified means pre-approved, but this is not the case. Getting pre-qualified doesn’t mean the bank will loan you that amount, but it can give you an idea of how much you can expect to be given once you get pre-approved.

Those who are not sure if they are ready to buy a home may want to get pre-qualified, but it’s not necessary to the mortgage process.

More on Mortgages and Home Buying:

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  • Sandy

    So I need advice to make it short. I got preapproved for a mortgage loan. Made an offer on a house they accepted. So we are starting the process with that. I’ve turned in pay stubs, W-2s and I’m nervous about turning in my bank statements. I live paycheck to paycheck and it works. My credit score is decent and my parents are going to help me with my down payment and what ever money i need out of pocket. Than I will be taking over monthly payments. I really need a bigger place as my family is expanding so I am stressing over my bank statements. So my question is should I be worried?

    • Jeanine Skowronski

      Underwriting standards can vary from lender to lender, but getting a mortgage is going to come down to three major factors: the amount of money you’re putting down, your credit score and your debt-to-income ratio. If your debt to income ratio is over 43%, than, yes, it can be difficult to secure a conventional loan. Conventional loans also are stricter on payment-to-income ratio,with max of 45%. FHA loans have less stringent underwriting standards: Your payment-to-income ratio, for instance, can be as high as 55%. You can find more info here:


      And this tool can be helpful in determining how much house you can afford:




      • Sandy

        I got approved for a FHA loan. I’m more worried about if they won’t finalize the loan because my bank account is low. I live paycheck to paycheck. Down payment isnt a issue I have the down payment covered.

        • Jeanine Skowronski

          They will probably do a credit pull before closing, but they’ll be looking for big changes to your credit score or DTI. If your credit report remains the same as when the loan was initially approved, it could go through, particularly if you’re putting down a large down payment.



        • Iculookingatme

          Hi Sandy,
          My bank statements looked terrible. OD fees almost $400. They did’t ask about it, My income/debt/dti was what they based it off. I do have savings (thanks to santa saver) but not much.

  • ShelbyS

    I am already pre-approved for a loan. We have done some shopping around and decided we might try something a little higher in price. Is is possible to try and get pre-approved again through the same bank accept on a higher amount?

  • Ray

    How does getting preapproved and a lender checking your credit affect your credit score? Does it lower your score somehow every time someone (other than yourself) checks your credit?

  • Wynn

    If I get preapproved from one lender, do have to use them for the final loan? Or can I switch to somebody else for some reason, like finding a better rate.

    • http://www.credit.com/ Credit.com Credit Experts

      Preapproval is not the same as final approval, and it does not obligate the lender to lend the money to you (or you to accept it). You are still free to shop.

  • sylvia

    How is that possible that person who wants to buy the house from us was pre approved for mortgage and on the end of the process didn’t get the loan and we lost 2,5 months

    • http://www.credit.com/ Credit.com Credit Experts

      Things can and do go wrong on the way to the closing table — it could be a job change, income loss, etc. It is impossible for us to know.

  • paige

    I got pre approved and we are starting the next step. However, I know they look at w2s and tax returns but I had to amend my 2014 because the income was wrong. Will this cause issues?

    • http://www.Credit.com/ Gerri Detweiler

      It really depends on how your income changed, and how that affects your debt ratios. We suggest you talk with your loan officer.

  • pam

    I live paycheck to paycheck. I literally have no money and in checking or savings. Will I be denied?

    • http://www.credit.com/ Credit.com Credit Experts

      It’s unlikely you could afford a mortgage if you have no money for closing costs or a down payment, if that is what you are asking. Your credit score also matters. You may want to consider saving and monitoring your credit score before you begin to consider homebuying. Here’s how to monitor your credit score for free.

      • pam

        I have a 401k account and gifts from family. I am just worried that right now if I apply to be pre qualified. My bank statements will prove otherwise. My question is; is it wise to put in an application?

        • http://www.credit.com/ Credit.com Credit Experts

          Preapproved and pre qualified are two different things, and the bar is lower for prequalification. You really have nothing to lose by talking to a mortgage broker about your situation and getting advice. Preapproval can give you an edge in negotiations because a seller can be confident that you can secure financing, but pre approval is becoming increasingly uncommon.

  • Bianca

    if i get pre approved but then i state i no longer want to buy a home
    would that affect my credit?

    • http://www.Credit.com/ Gerri Detweiler

      The only impact to your credit score will be the inquiry – and that shouldn’t be major.

  • http://www.Credit.com/ Gerri Detweiler

    Welcome to the mortgage world! Underwriting is a very involved process unfortunately. Everything – and I do mean everything – must be verified, explained, scrutinized etc. Hang in there though and hopefully you’ll have a home soon and it will all be worth it.

    • KLo

      So you don’t necessarily get a locked in rate when pre approved?

      • Jeanine Skowronski

        You can get a rate lock. It depends on the offer.



  • http://www.Credit.com/ Gerri Detweiler

    Unfortunately the mortgage process can be very onerous! Pre-approval should provide a good gauge of whether you should qualify but the underwriting process could uncover additional issues. Very sorry to hear you had such a bad experience.

  • http://www.credit.com/ Credit.com Credit Experts

    Could be either. Trulia estimates a week to several months. It varies widely.

  • the lastros

    does anyone know whats the point of getting pre approved if at the end when you already done wasted time and money to a put a offer on a home there is still a very high chance of not getting the final approval ??!!! I don’t get it !!! why not do everything and have a final saying if yes or no BEFORE you go out and waste time and money going from house to house ?!!!!!

    • http://www.Credit.com/ Gerri Detweiler

      So sorry to hear what you went through. Pre-qualification and pre-approval are two different things. Were you fully preapproved or just prequalified?

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