Mortgage BasicsHow to Get Pre-Approved for a Mortgage

How to Get Pre-Approved for a Mortgage

If you are like millions of Americans, buying a home will most likely be one of the most significant financial decisions you’ll make in your life. And getting pre-approved by a lender is one of the many ways to make your home buying journey easier and faster. 

In this article, you will learn: 

  • What It Means to Be Pre-Approved for A Mortgage
  • Is a Mortgage Pre-Approval the same as Pre-Qualification?
  • How To Get Pre-Approved for A Mortgage?
  • How Long Does It Take to Get Pre-Approved?
  • How Long Does a Mortgage Pre-Approval Last?
  • What Does a Mortgage Pre-Approval Letter Say?
  • Will Getting Pre-Approved by Multiple Lenders Hurt Your Credit Score?

What It Means to Be ‘Pre-Approved’ for a Mortgage

To be pre-approved for a mortgage means that a lender or bank has evaluated your finances, employment, debt, and credit history to determine that you are an eligible candidate for a loan. 

Getting pre-approved proves to sellers and real estate agents that you have the financial ability to afford a home. By showing a lender is willing to lend you money, you show that you’re serious about buying. Remember, however, that getting pre-approved for a mortgage is not a promise that you’ll get a loan or the stated loan amount in the pre-approval letter. 

Is A Mortgage Pre-Approval the Same as Pre-Qualification?

While the two might sound similar, they, in fact, mean very different things when it comes to the mortgage process. There are several differences between getting pre-approved for a mortgage and being pre-qualified for one. The major difference between these two terms is the depth of the lenders’ investigation. 

To get pre-qualified, you’ll need to submit your income, debt, and other financial details to your lender, and your lender gives you a rough estimate without questioning your number. It is common to hear statements like, “Based on your submitted details, you may be eligible for XYZ amount.” 

On the other hand, a mortgage pre-approval involves a more thorough investigation of your finances by a lender. When getting pre-approved for a mortgage, your lender will make a personal inquiry of your finances, pull your credit history, and verify your income before presenting you with a pre-approval letter. 

How To Get Pre-Approved for A Mortgage?

Arming yourself with the correct information and paperwork can make your pre-approval process a breeze. Remember that a mortgage pre-approval process is simply a mortgage application. This means that your lender will want to evaluate your documents closely. Here is how to get pre-approved for a mortgage in four steps, even as a first-time homebuyer.

1. Check Your Credit Score

Your credit score plays a huge role in getting pre-approved for a mortgage. Make sure you get a copy of your credit score before starting the process. Most lenders will inquire about your FICO score, usually a combined credit report from the major credit bureaus. 

Depending on the type of loan, your lender may request a credit score of 620 or higher for conventional loans and a credit score of 520 and above for government-backed mortgages like the FHA loans.

2. Provide Proof of Income and Assets

When applying for a mortgage pre-approval, you’ll need to provide your lender with proof of your income and assets. Typically, you will have to present your lender with a copy of your W-2 wage statement for the last two years, pay stubs, and other additional income sources like alimony, child support, and dividends.

Your lender may also request to see your tax returns for the last two years, cash reserves, retirement account statement, and other investment information. These details prove to your lender that you are financially capable of footing the downpayment and closing costs. 

3. Secure Employment Verification

From your lender’s perspective, stable employment is key to your financial health. Your lender may request that you provide verification of employment (VOE) letter from your employer. Others may put a call through to your employer after evaluating your employment-related documents. 

4. Submit Other Personal Documents

Finally, your lender will ask for additional personal documents like a copy of your drivers’ license, Social Security Number (SSN), and legal signature to access your credit report. If you are an existing homeowner, you may have to present your current property tax bill. 

More importantly, if you run a personal business or are self-employed, be ready to submit a profit or loss statement for the last two years. 

How Long Does It Take to Get Pre-Approved?

As long as your finances, credit score, and paperwork are in order, you should be able to get your pre-approval letter within one to seven business days, on average. However, if you need to wait for an income audit or employment verification, it can take a little longer. But generally speaking, it shouldn’t take more than two weeks. The only way to avoid delays when getting pre-approved for a mortgage is to fix your finance, credit history, and debts before applying. 

How Long Does a Mortgage Pre-Approval Last?

Yes, every mortgage pre-approval letter comes with an expiration date. After getting pre-approved, many things about your financial and personal situation may change, such as your income, employment, debt to income ratio, credit score. The interest rate could also change. These factors are why mortgage pre-approval letters only last for 60-90 days. In some but rare cases, mortgage pre-approval letters could last 180 days.

Once your pre-approval status expires, you’ll need to update your document to get a new one. But keep in mind that when you apply again, your lender might request another credit inquiry, which could be bad for your credit score. They might also require up-to-date documents, which could be additional hurdles in your homebuying process.

What Does a Mortgage Pre-Approval Letter Say?

If you’re pre-approved for a mortgage, your lender will provide you with a pre-approval letter on official company letterhead. This document proves to sellers and real estate agents that you are serious and have the financial means to present a reasonable offer on the home. A typical pre-approval letter will contain the following information:

  • Purchase price
  • Loan amount
  • Loan type
  • Property address
  • Down payment
  • Expiration date
  • Interest rate

Will Getting Pre-Approved by Multiple Lenders Hurt My Credit Score?

Getting pre-approved for a mortgage even by multiple lenders won’t have much impact on your credit score. Since credit inquiry is an essential aspect of a mortgage pre-approval process, credit agencies expect you to make multiple inquiries at this time. 

Because of this peculiar situation, credit agencies allow borrowers to apply for mortgage pre-approval at several lenders within a 45-day window. So, as long as your credit inquiry falls within the 45-days or less after the first inquiry, all of your inquiries will only be recorded once to avoid a negative impact on your credit score. 

Final Thoughts

Whether you’re purchasing a house with a mortgage as a first-time homebuyer or seasoned buyer, getting pre-approved for a mortgage is the first step to owning a property. Not only does getting a pre-approval letter make you appear to potential sellers as a serious contender, but it also gives you an idea of the amount you can afford. While getting pre-approved doesn’t equate to securing a loan, it is essential if you plan to get a mortgage. 


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