How to get pre-approved for a mortgage


If you are shopping for a home, you must get pre-approved for a mortgage. A mortgage pre-approval helps you understand how much you can borrow to buy a home, makes you more attractive to sellers, and alerts you to issues that may affect your ability to get a loan. To get pre-approved, you will need to provide the lender with the documents they will use to verify your personal, employment and financial information.

How to get pre-approved for a mortgage

A mortgage pre-approval is a letter from a lender that they are initially willing to lend you a set amount for a home.

Getting pre-approved for a mortgage is a critical first step in the home buying process. Sellers often want to see a pre-approval letter before accepting your offer on their homes.

Fortunately, the process of applying for pre-approval is relatively quick and simple. Let's explore what you need to do and how a mortgage pre-approval can benefit you during the home buying process.

What is a pre-approval for a mortgage?

A mortgage pre-approval is a lender's conditional approval for a home loan in the form of a pre-approval letter. 

It lets home sellers know that you are likely to be approved for a certain amount of financing, based on the information you provided in your pre-approval application. Keep in mind that pre-approval is not a guarantee that you will agree to a mortgage, and the terms you are offered may change after you submit your full formal mortgage application.

How long does it take to get pre-approved for a mortgage?

The time it takes to obtain pre-approval can vary by lender. It may take a few minutes to get the basic pre-approval for 24 hours, 10 days or more. If you're in a time crunch, make sure you know how long the pre-approval process takes with each of the lenders you're considering.

What is the difference between mortgage pre-approval and mortgage pre-qualification?

The main difference is the level of scrutiny at which your information is checked. Pre-qualification is issued without verification of income, employment history, assets, etc. It is assumed that the information you provide is accurate. But pre-approval is only issued after the lender verifies the information you provide.

Is Mortgage Pre-Approval Worth It?

Mortgage pre-approval comes with many benefits. First, it gives you an idea of ​​how much you can borrow, which will help narrow your search to homes in your price range. But remember that just because you have pre-approved for an amount does not mean that you have to borrow the maximum. In many cases, you probably won't. This is because many mortgage lenders use your gross monthly income (versus your monthly net income) as a factor in determining how much you qualify for.

Generally, a lender does not take into account daily living expenses — things like groceries, utilities, child care, health care, or entertainment — or monthly debts in their accounts. It is up to you to review your budget to ensure that you are satisfied with the loan amount. Don't rely on your lender to tell you what you can afford.

The pre-approval process can also reveal potential issues that might prevent you from getting a mortgage, so you can work them out before you set your heart on the house.

Finally, a mortgage pre-approval lets sellers know that you have the ability to borrow to support an offer you make to buy their home, which can make your offer more competitive. It tells real estate agents, who usually work on commission, that spending time with you can pay off with a transaction. It alerts lenders that you are a smart borrower who may soon get a mortgage loan.

In short, getting pre-approved for a mortgage indicates that you are a serious buyer.

How to get pre-approved for a mortgage

Applying for a pre-approval for a mortgage is a straightforward process that requires some paperwork and, in many cases, only a few days for the lender to verify your personal and financial information.

 The process for each lender is different, but they will generally review your credit history, income, assets and debts before deciding to give pre-approval, and if so, how much.

Gather the appropriate documents

Lenders will want to verify your identity, credit history, employment history, income and financial assets to issue a pre-approval. They'll likely ask you to fill out a standard home loan application form (almost everyone calls it 1003 or "ten-three-three"—here's an example).

The 1003 application requests your personal information, financial information, and loan information, including...

  • Bank accounts, retirement accounts, and other accounts
  • Any other assets you have
  • The property you own
  • Income and work details
  • Employer contact information
  • Debts you owe or other liabilities

The lender will also likely run a difficult credit check, and may request additional documents based on your individual situation, such as payment slips, tax returns, or bank statements.

Get quotes from various real estate lenders

Just as you want to get the best deal on the home you buy, you also want to get the best deal on your home loan.

Each lender has different interest rate guidelines and options, which can have a huge impact on your monthly payments. If you only get pre-approved with one lender, you're stuck with what to offer. When you get pre-approved with several lenders, you can choose the offer that works best for you. Many lenders offer the ability to apply for pre-approval, including Bank of America, Better Mortgage, and Rocket Mortgage.

It is important that you do your homework before choosing potential lenders. You should research every lender and even the loan officer who will handle your mortgage - there can be a huge difference in knowledge and experience, depending on who is processing your application.

After selecting a few lenders, you will provide the information needed to complete the pre-approval process. The underwriter may examine your pre-approval application to determine how much you can borrow. If the guarantor has not reviewed your application, it means that you have not fully pre-approved - so be sure to inquire about the status of your application during the process.

Once a lender has all the documents it needs, it usually only takes a few days for the lender to let you know if you have pre-approved and how much it has been approved. But the pre-approval process can take longer if you've had in the past foreclosure, bankruptcy, IRS foreclosure or bad credit.

If you're shopping for a mortgage, you have a window of time where multiple credit inquiries by lenders are counted as a single inquiry about your credit score. The window is usually 14 days - although it can be longer.

Since it is difficult to know which credit scoring form a lender will use, you will likely want to receive all of these quotes within 14 days.

Don't get pre-approved too long in advance

When you receive your pre-approval letter, it will likely say it's good for 30 to 90 days. Since this is a relatively short period, you'll probably want to wait for the pre-approval letters until you're ready to start shopping in earnest for a home. 

And remember, informed consent is only conditional consent. If you accumulate more debt, change jobs, or reduce your savings, you may be rejected when you go for final approval of a mortgage.

Choose a lender

Once you've made an offer to buy a home, it's time to get official loan estimates from your list of potential lenders. After you apply for a mortgage, the lender must submit this estimate within three business days of receiving your application. 

The document will include estimates of the interest rate, monthly payment, closing costs, taxes and insurance, as well as details about how the loan will work, such as any penalty fees. 

After reviewing and comparing estimates, you can choose the lender that best meets your needs and work with them to complete your application.

Tip: To get a general idea of ​​mortgage rates for where you live, check out the map below.

Mortgage rates where you live

Mortgage or refinance rates depend on various factors, including where you live. To better understand what rates you may qualify for, including the average mortgage or refinancing rate in your area, take a look at Credit Karma's markets for mortgage rates and mortgage refinance rates as well as the latest state-specific guides.

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