Why mortgage preapproval matters
When you’re ready to get serious about buying a house, one of the key steps is getting preapproved for a mortgage. Mortgage preapproval helps you understand your home buying budget, interest rate, and future mortgage payment. And it also signals real estate agents and sellers that you’re a serious buyer.
In today’s housing market, it’s crucial to get preapproved before you try to make an offer on a home. Here’s everything you should know about how to get preapproved for a mortgage.
Get started on your mortgage preapproval. Start hereIn this article (Skip to…)
- What is preapproval?
- How to get preapproved
- When to get preapproved
- Preapproval vs prequalification
- Preapproval FAQ
- Begin your preapproval
What is mortgage preapproval?
Unlike prequalification, mortgage preapproval involves a thorough review of your financials, including credit and income, providing a clearer picture of what you can afford. It is the second step toward final mortgage approval, following an initial “prequalification” screening (which only offers a quick estimate of your borrowing power).
You’ll submit documents like bank statements and tax forms, and once preapproved, the lender will issue a mortgage preapproval letter confirming you’re a qualified buyer. This letter not only shows sellers you’re serious, but also outlines the loan amount, interest rate, and terms you can expect. Mortgage preapproval gives you the confidence to make offers and demonstrates your financing is secured.
Get started on your mortgage preapproval. Start here
How to get preapproved for a mortgage
Getting preapproved for a mortgage is an essential step in the homebuying process. As we’ve already mentioned, it involves more than just filling out a quick form—your lender will need to verify your financial information to ensure you’re ready for a loan.
Here’s what you should do when getting preapproved for a mortgage:
Get started on your mortgage preapproval. Start here1: Gather your documentation
Your lender will need documentation to verify the information provided in your loan application, which is what sets mortgage preapproval apart from prequalification. To complete the mortgage preapproval process, your lender will typically ask for the following documents:
- Identifying documents such as a valid driver’s license or photo ID
- Last two years’ W-2s and/or 1099s
- Last two years’ tax returns
- Profit & Loss statement if self-employed
- Pay stubs for the last 30 days, if applicable
- Statements from bank accounts, retirement accounts, and other asset accounts from the most recent two months
- Divorce decree or separation agreement, if applicable
- Contact information for your landlord(s) for the last two years, if you’re a first-time home buyer. If you are currently a homeowner, your housing payment history will show up on your credit report
To speed up the mortgage preapproval process, it helps to have these documents in hand before you get started. Some lenders can pull documents directly from your employer and bank, but not all. Some can also verify your income with the IRS, with your consent.
2. Complete your mortgage preapproval application
To get preapproved for a mortgage, you need to fill out a mortgage loan application. Most lenders let you complete the app online, over the phone, or in person. Online applications typically take 10-20 minutes to complete. The loan application, asks for your personal information, Social Security number, financial information, and loan details.
After your application is completed, the lender will pull a three-bureau credit report known as a tri-merge. This report shows your credit scores and credit history from the major credit-reporting agencies: TransUnion, Equifax, and Experian.
Note, you can apply and get preapproved for a mortgage with any lender you wish. You can even get preapproved by more than one lender to find the best offer. Mortgage preapprovals are non-binding, and you’re free to switch lenders before taking out the loan.
3. Start house hunting with your preapproval letter in hand
Once you’ve filled out a preapproval application, turned in documents, and paid the application fee, the hard part is behind you. Your lender will finalize the review and let you know what you’re preapproved for.
With a mortgage preapproval in hand, you’re not just another window shopper—you’re a serious, ready-to-buy homebuyer. You can confidently start your home search, knowing exactly what you can afford and showing sellers that you’re prepared to make a deal. Now it’s time to find a home that matches your budget and vision.
Get started on your mortgage preapproval. Start here
When to get preapproved for a mortgage
You should get preapproved for a mortgage as soon as you’re serious about buying a home. Ideally, this step should happen before you start house hunting or making offers.
The mortgage preapproval will tell you how much home you can truly afford, so you know you’re shopping in your price range. Plus, you need a mortgage preapproval letter in hand to make a serious offer on a house. So getting it done early on helps you move quickly when you’re ready to buy.
Your mortgage preapproval is typically good for 30 to 90 days; check with your loan officer for specific details. You’ll likely have the option to update and extend your preapproval letter if your home search takes longer than expected.
“Some lenders will go a step further and can even get you fully underwritten at this time,” says Jon Meyer, The Mortgage Reports loan expert. In this case, he says, “your letter is what we call an ‘advanced approval,’ where your offer needs no financing contingency.”
Mortgage preapproval vs. prequalification
A mortgage preapproval is different from mortgage prequalification. A mortgage preapproval gives you verified home buying power, whereas a prequalification letter only estimates your home buying budget without fully verifying your eligibility.
Get started on your mortgage preapproval. Start hereWhile you can get prequalified faster than you can get preapproved for a mortgage— because no documents are required — your estimated budget and rate might not be as accurate. And a prequalification letter won’t help you make an offer on a house.
While both processes help buyers understand how much house they can afford, mortgage preapproval is generally more desirable because it verifies income and pulls FICO scores from the major credit bureaus.
Mortgage preapproval involves a more thorough verification of your finances. It shows that a buyer has taken the time to determine their loan eligibility, and that they are prepared to move forward quickly should a home seller accept their offer.
Mortgage preapproval FAQ
Get started on your mortgage preapproval. Start hereMost mortgage preapprovals require a hard pull on your credit, which can affect your credit score. But the impact is usually very small. According to myFICO, one hard inquiry will take less than five points off your FICO score. (For perspective, the full scoring range is 300-850.) And if you get multiple pre-approvals within 2-4 weeks of one another, they all count as a single hard inquiry — so your score will only be dinged once.
Mortgage preapproval letters are typically valid for anywhere from 30 to 90 days. However, a preapproval can be updated and extended if the lender re-checks your information. The preapproval letter serves as evidence that a lender has reviewed your credit and verified your income and assets.
Getting preapproved is similar to getting prequalified, except a preapproval requires all the information you provide to be documented. For preapproval, you typically have to complete a full mortgage application where your credit history, employment history, and monthly income will be examined. You will supply the lender with financial documentation like bank statements, pay stubs, tax returns, and W2s.
Preapproval is free with many lenders. However, some charge an application fee, with average fees ranging from $300-$400. These fees may be credited back toward your closing costs if you move forward with that lender. However, since preapproval does not tie you to a lender, we’d recommend starting out with one that offers a free preapproval. You can always choose a new lender later on if you find a lower mortgage rate.
The timeframe for getting preapproved varies by lender. Most lenders take one to three days. Banks and credit unions may take up to 30 days. For the fastest preapproval, look for a lender that specializes in digital loan applications.
You should get preapproved before you start house hunting; the earlier, the better. Many lenders recommend getting preapproved 3-6 months before you plan to buy a home. If you foresee roadblocks for your loan (like having to improve your credit score or pay off debts), you may want to get your first preapproval up to a year prior to your home purchase. That should give you enough time to clean up your credit report and increase your down payment.
Preapproval letters vary from lender to lender. They typically include the purchase price, loan program, interest rate, origination fees, loan amount, down payment amount, expiration date, and the property address. The letter is typically submitted with your offer to buy a new home.
If you need to switch loan programs after getting preapproved — from a conventional to an FHA loan, for example — you’ll likely need to start the preapproval process all over again with a new loan application. Doing this would likely delay your closing and change the interest rate and terms of your loan.
A seller’s real estate agent may not want to show a home unless you have a preapproval letter. Your own agent would likely show the property; however, most real estate agents prefer working with home buyers who have been preapproved. The preapproval letter proves you’re a serious buyer and borrower.
Yes. Mortgage underwriting depends, in part, on your other monthly debts as measured by your debt-to-income ratio. Credit cards, auto loans, student loans, and other personal loans will factor into your DTI. If your ratio is too high, lenders may not be able to approve you. After getting preapproved, avoid applying for other loans or increasing your credit card balances before the home closes.
Start the mortgage preapproval process
If you’re ready to start house hunting — or even considering it in the near future — it’s time to start the mortgage process by getting preapproved for a home loan. The mortgage approval process will help lock in your borrowing power and give you an advantage in a competitive housing market. It’ll also turn up relevant issues, like a low credit score, that you might fix before beginning your homeownership journey.
Time to make a move? Let us find the right mortgage for you
