How to Get Pre-Approved for a Mortgage Home Loan

Think of mortgage preapproval as the prologue to buying your home. Mortgage preapproval means a lender reviewed your information to decide whether you’d be approved for a mortgage based on some initial basic information about your financial status. With a preapproval in hand, agents and sellers can take you just a little more seriously.

What Does Preapproval Mean?

Preapproval means that the lender is confident that you’ll make the down payment and that you have an income that can cover future payments. After preapproval, the home needs to be appraised for an amount more than or equal to the purchase price. This is for the lender—they need to make sure the property value has sufficient collateral for the loan amount.

The First Step in Mortgage Preapproval

Before trying to get preapproved for a home loan, check your credit reports and credit score. You’ll have a better idea of what kinds of loans and interest rates you might qualify for. And if your credit isn’t ideal, you can take the time to clean up your credit report before you start shopping for homes.

If you want to take a peek at your credit score, our Credit Report Card gives you a snapshot of how your credit is doing. But if that isn’t enough, there’s always ExtraCredit—our newest product that’ll let you take a look at all 28 of your FICO® scores.

How soon after a preapproval can I begin to shop around for a mortgage?

While getting a preapproval can help speed up the final mortgage approval process, other factors will affect the time line. The preapproval process may take around one to three days.

After you’re preapproved, you receive a preapproval letter as evidence that you have a lender that has already verified your assets. The letter is typically valid for 60 to 90 days. However, it can be updated with reverification of the information.

Once you receive a preapproval letter, you can start shopping for mortgages. Compare rates now to see what you might qualify for.

What Else You Need for a Mortgage Preapproval

  • Income Information. Be prepared to supply pay stubs, tax returns and W-2s from the previous two years as well as documents that show additional sources of income. Examples of additional income can include: a second job, overtime, commissions and bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony or child support.
  • Asset Information. This documentation can include bank account statements as well as information about investments. If a family member or friend is giving you money, you’ll also want to bring documentation of this information. That might be in the form of a gift letter, which shows the money is not a loan.
  • Personal Information. You’ll need to bring a valid form of identification such as a driver’s license or passport. Plus, you’ll need to provide your Social Security number for a credit check.

Why Is It Important to Get Preapproved?

When you’re ready to make a purchase offer on a home, both your real estate agent and the seller might want to see a preapproval letter. This document proves you’ll likely be able to make the purchase, so you’ll be taken seriously. In a competitive housing market, sellers prefer a preapproved buyer to a buyer who might be unable to close the deal.

Preapproval is a huge benefit. It can help you understand what you can get a loan for. Whether or not you can get a loan can help you decide if now’s the time for you to buy a home. It can also give you an idea of what price range to look in when considering homes.

Understanding the Mortgage Loan Application Stages

You might be tempted to roll up your sleeves and look into preapproval. Before you do, make sure you understand the three basic stages of the mortgage application process: prequalification, preapproval and mortgage commitment.

Mortgage Prequalification

Getting prequalified for a mortgage is a pretty informal process. You’ll get interviewed by a mortgage professional about your assets, income and expenses. This process gives you a general idea of the price range you can afford. Prequalification doesn’t bring you any closer to securing a mortgage, but it does give you insights you wouldn’t have had otherwise.

Mortgage Preapproval

If you’re preapproved for a mortgage, it’s because a lender has looked closely at your credit reports, your employment history and your income. The lender used that information to determine which programs you qualify for, the maximum amount you can borrow and the interest rates.

But be beware that your loan representative is not the one who will ultimately approve your loan. That is the underwriter’s role. The initial stages of mortgage underwriting is often automated today. The automated underwriting system delivers a mortgage preapproval letter within minutes of a completed application and lists any conditions that need to be met for full approval.

Mortgage Commitment

A lender will issue a loan commitment after approving both you and the property you intend to purchase. The underwriter returns one of four decisions: approval, approved with conditions, suspended or denied. Suspended means that the underwriting process requires more information or documentation from you.

If your first application gets rejected, you can get a second opinion from a lender if you have a very good reason why you should be approved.

Common FAQs

What is the difference between a mortgage preapproval and a mortgage prequalification?

Think of mortgage prequalification as the first—and very quick—step. You’re basically just giving a lender a look into your financials situation. You’ll supply the lender with information like your debt, income and assets. There are usually no costs involved in this process. Plus, there isn’t a credit analysis for a prequalification.

Preapproval typically requires a bit more work than prequalification. You usually have to complete a mortgage application and pay the mortgage application fee. Lenders will also require documentation, as well as your credit history and score. So you can expect a credit check during this process.

Should I try to get preapproved through more than one lender?

You can consult multiple lenders when trying to get mortgage preapproval. Having more than one lender allows you to compare rates and explore different lending programs.

If working with a mortgage broker, they’ll consult various programs and lenders for you. Typically, if you conduct all these applications in a short time frame—such as around 45 days—they’re treated like one application for credit reporting purposes. Which is great for you—you’ll have only one hard inquiry hitting your credit score.

I received a preapproval letter but was still denied. Why?

There could several reasons why your preapproval went through, but your mortgage application was denied. A common reason is a change of employment for the buyer. Many lenders require a consistent work history, and if the lender finds any gaps after you have been preapproved, they may end up denying you. Another reason you might be denied is a negative item could have been found on your credit profile.

Reduce the chance that your preapproval turns into a denial by:

  • Staying aware of what’s on your credit report and acting quickly to verify the information on your credit report or request the tradeline be verified
  • Continuing to pay bills on time
  • Avoiding additional debts that can change your debt-to-income or credit utilization ratios
  • Staying aware of lender’s loan requirements or guidelines, which can change

Can the coronavirus pandemic or another emergency impact my ability to get preapproved for a mortgage?

The economic impact of a pandemic or other emergency could influence your approval for a mortgage. Here are just a few ways:

  • If you lost your job due to coronavirus, your change in income could mean you don’t get preapproved or that you’re denied even after preapproval.
  • The economic changes related to a national emergency can make it either harder or easier to get a loan in general, depending on how the banks react.
  • Housing costs can be impacted by events such as the coronavirus, changing whether you can afford or get approved for certain homes—or potentially making it easier to do so if prices have come down.

How does my credit score affect the preapproval process?

Your credit score and credit history will influence the kind of loan programs and interest rates you can qualify for. It can also impact how much you need to provide for your down payment. When you’re seeking a mortgage preapproval, you shouldn’t take on any additional lines of credit or increase the debt you currently have. This can have an impact on your credit score.

Do mortgage preapprovals affect credit score?

Because the preapproval process does involve a hard inquiry on your credit report, it can cause your score to drop by a few points. However, since mortgage applications within a short time period only count as one hard inquiry, the impact is minimal.

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