Guide to Getting Pre-Approved for a Mortgage

Your Guide to Getting Pre-Approved for a Mortgage

Getting pre-approved for a mortgage is a critical step in the homebuying process. It not only helps you understand how much you can afford but also shows sellers that you’re a serious and qualified buyer. In this guide, we’ll walk you through the steps to get pre-approved, what documents you’ll need, and tips to make the process as smooth as possible.  We have a number of lenders that we can recommend for your situation, feel free to contact us today for some recommendations!

What Is Mortgage Pre-Approval?
Mortgage pre-approval is a lender’s evaluation of your financial situation to determine how much they’re willing to lend you for a home purchase. Unlike pre-qualification, which is a more informal estimate, pre-approval involves a thorough review of your credit, income, and assets. You’ll receive a pre-approval letter, which is a powerful tool when making an offer on a home.

Steps to Get Pre-Approved:

1. Check Your Credit Score
Your credit score plays a significant role in determining your eligibility for a mortgage and the interest rate you’ll receive.

What to Do:

Request a free credit report from AnnualCreditReport.com.

Check your score and address any errors or issues, such as late payments or high credit card balances.

Aim for a score of at least 620 (though higher scores secure better rates).

2. Gather Your Financial Documents
Lenders will need detailed information about your finances. Here’s what you’ll typically need:

Proof of Income:

Recent pay stubs (last 30 days).

W-2 forms from the past two years.

Tax returns (last two years, especially if self-employed).

Proof of Assets:

Bank statements (last two to three months).

Investment account statements.

Employment Verification:

Contact information for your employer.

If self-employed, profit-and-loss statements or 1099 forms.

Identification:

Government-issued ID (e.g., driver’s license or passport).

Social Security number.

3. Research Lenders and Loan Options

Not all lenders are the same, so it’s important to shop around.

What to Do:

Compare interest rates, fees, and loan terms from multiple lenders (banks, credit unions, and online lenders).

Decide on the type of mortgage (e.g., fixed-rate, adjustable-rate, FHA, VA, or USDA loans).

Choose a lender that offers the best terms and aligns with your needs.

4. Submit a Pre-Approval Application
Once you’ve chosen a lender, you’ll need to complete a pre-approval application.

What to Do:

Provide all required financial documents.

Be honest and accurate about your income, debts, and assets.

Be prepared to answer questions about your employment history and financial goals.

5. Wait for the Lender’s Review
The lender will review your application and documents, check your credit, and assess your debt-to-income ratio (DTI).

What to Expect:

A DTI below 43% is typically required, though some lenders may accept higher ratios.

The lender may request additional documentation or clarification.

The process can take a few days to a week.

6. Receive Your Pre-Approval Letter
If approved, the lender will issue a pre-approval letter stating the loan amount you qualify for.

What to Know:

The letter is typically valid for 60 to 90 days.

It’s not a guarantee of final approval but shows sellers you’re a serious buyer.

You can get pre-approved by multiple lenders, but too many credit checks in a short period can lower your score.

Tips for a Successful Pre-Approval Process
Pay Down Debt: Lowering your debt can improve your DTI and increase your borrowing power.

Avoid Major Financial Changes: Don’t open new credit accounts or make large purchases before or during the pre-approval process.

Save for a Down Payment: While pre-approval doesn’t require a down payment, having savings set aside strengthens your position.

Be Honest: Provide accurate information to avoid delays or denial of your application.

Ask Questions: If you’re unsure about any part of the process, don’t hesitate to ask your lender for clarification.

What’s Next After Pre-Approval?
Once you’re pre-approved, you’re ready to start house hunting with confidence! Keep these steps in mind:

Stay Within Your Budget: Stick to homes within the price range outlined in your pre-approval letter.

Work with a our team of professional Real Estate agents: We're here to help you every step of the way, from helping you find homes that meet your criteria and negotiate on your behalf all the way through closing.

Be Ready to Move Quickly: In competitive markets, having a pre-approval letter can give you an edge over other buyers.

Final Thoughts
Getting pre-approved for a mortgage is a crucial step in your homebuying journey. It not only clarifies your budget but also positions you as a strong candidate in the eyes of sellers. By following these steps and preparing your finances, you’ll be well on your way to securing the keys to your dream home.

Happy house hunting!

Disclaimer: This guide is for informational purposes only. Mortgage pre-approval requirements and processes may vary by lender. Always consult a financial advisor or mortgage professional for personalized advice.