How to Get Pre-approved for a Mortgage
Buying a home is one of the most significant financial decisions you’ll ever make. Whether you’re a first-time homebuyer or looking to upgrade, one of the first steps in the process is getting pre-approved for a mortgage.
In this guide, we’ll explain what mortgage pre-approval means and walk you through the step-by-step process of getting pre-approved. As a first time home buyer realtor, The Haven Group is here to guide you through every step of getting pre-approved for a mortgage.
What Is Mortgage Pre-approval?
Mortgage pre-approval is a lender’s conditional agreement to lend you a certain amount of money to buy a home.
During the pre-approval process, a lender will review your credit history, income, debts, and other financial details to determine how much you might be able to borrow. Once pre-approved, you’ll typically receive a letter that you can present when making an offer on a home.
Why Is Pre-approval Important?
Getting pre-approved offers several benefits:
- Set a realistic budget: You’ll know how much you can afford to spend on a home.
- Identifies financial issues early: You’ll have time to correct problems with your credit or income before house hunting.
- Speeds up the loan process: Since much of the paperwork is already complete, final approval can occur more quickly.
Steps to Get Pre-approved for a Mortgage1. Check Your Credit Score
Before applying for pre-approval, check your credit score to ensure it is accurate. Most lenders require a credit score of 620 or higher to get a regular loan. A higher score can help you get better loan offers. If your credit score is low, work on raising it by:
- Paying down credit card balances
- Making payments on time
- Disputing any errors on your credit report
2. Calculate Your Budget
Determine how much you’re comfortable spending on a monthly mortgage payment. Factor in costs like:
- Principal and interest
- Property taxes
- Homeowners Insurance
- Private mortgage insurance (PMI), if required
- Homeowners Association (HOA) fees, if applicable
3. Gather Your Financial Documents
To get pre-approved, you’ll need to provide several documents that demonstrate your income, assets, debts, and employment history. Common documents include:
- W-2s from the past two years
- Recent pay stubs (last 30 days)
- Bank statements (last 2–3 months)
- Tax returns (last two years, primarily if self-employed)
- Identification (driver’s license or passport)
- Social Security number for a credit check
4. Research Lenders
You can apply with banks, credit unions, mortgage brokers, or online lenders. Some may offer better terms or be more flexible based on your financial situation.
Ask about:
- Interest rates
- Loan types available (conventional, FHA, VA, etc.)
- Estimated closing costs
- Prepayment penalties
- Customer service availability
5. Submit a Pre-approval Application
Once you’ve chosen a lender, you can begin the application process. It can often be done online, over the phone, or in person. You’ll need to fill out a mortgage application (called a Uniform Residential Loan Application) and submit your financial documents.
The lender will:
- Pull your credit report
- Review your income and debt
- Calculate your debt-to-income (DTI) ratio
- Assess your ability to repay the loan
6. Wait for the Pre-approval Decision
Most lenders will respond within a few business days. If you’re approved, you’ll get a letter saying you’re pre-approved includes:
- The loan amount you’re approved for
- Estimated interest rate
- Loan type (fixed-rate, adjustable, etc.)
- Expiration date (usually valid for 60–90 days)
This letter shows sellers and agents that you’re financially ready to buy, giving you a competitive edge in the housing market.
7. Keep Your Finances Stable
Once you’re pre-approved, it’s crucial to maintain your financial stability. Avoid making large purchases or opening new credit accounts. These actions can hurt your credit score or increase your debt levels. Lenders typically conduct a final financial review before closing the loan.
Avoid:
- Switching jobs
- Taking on new debt
- Missing any bill payments
Common Reasons for Mortgage Pre-approval Denial
Not everyone who applies for pre-approval gets it. Some common reasons for denial include:
- Low credit score
- High debt-to-income ratio
- Insufficient income
- Incomplete documentation
- Unstable employment history
If you’re denied, ask the lender why and take steps to fix the issue.
Final Tips for Success
- Start early: Begin the pre-approval process before house hunting.
- Stay in touch with your lender: Keep them informed of any changes in your income or employment status.
- Understand your pre-approval terms: Know how long the letter is valid and what conditions apply.
Conclusion
Getting pre-approved for a mortgage is a crucial and essential step in the home-buying process. It provides clarity on your budget, makes you more competitive as a buyer, and helps you avoid surprises down the road. By understanding the process and preparing in advance, you’ll set yourself up for a smoother and more successful home purchase.
Begin by checking your credit, organizing your finances, and contacting trusted lenders. With a mortgage pre-approval in hand, you’ll be well on your way to finding your dream home.
