How to Get Pre-Approved for a Mortgage

There may be nothing worse than spending weeks or even months seeking out the perfect home, putting in an offer, and having it accepted, only to discover that you cannot get approved for a mortgage. Avoiding this potentially devastating scenario is the main reason that many people choose to get pre-approved for a mortgage.

Pre-approval is not the same thing as pre-qualification

One of the biggest mistakes a buyer can make is to assume that because they have pre-qualified, they do not need to be pre-approved. These are two steps in the same process, but they are not the same thing. Think of pre-qualification as a potential employer getting your resume and deciding if it is worthy of bringing you in for an interview. You don’t have the job yet, but there is reason to believe that you may be hired. Likewise, pre-qualification for a loan means you do not yet have the loan but there are signs that you are likely to be qualified.

Pre-approval is much closer to actually getting the job. You will have to fill out a full application, your credit records will be pulled, and, if pre-approved, you will get an offer in writing for a loan at a given interest rate.

5 things you need to get pre-approval

Every lender is different but the five criteria that are almost always needed to secure pre-approval are as follows:

  1. Proof of income.
  2. Proof of assets.
  3. Good credit.
  4. Employment verification.
  5. Documentation, such as social security number and copy of your government-issued ID

Pre-approval is not a guarantee

If you do receive a pre-approval offer, then it is safe to start shopping. That said, there are still other steps to go through with your potential mortgage lender but they come once you have a specific property in mind. This gives the lender wiggle room in case the property does not meet their specifications.

It can also give them an out in the event that your financial situation changes between the date of pre-approval and the date you find the home you want to buy. This is why it is essential to ensure that you do not make significant changes to your finances, such as opening new credit accounts or letting payments lapse.

Though the lender you work with may have different criteria, the basic things that are required before the lender will move a pre-approval into an approval include:

  • Valid sales contract on a specific property
  • A satisfactory appraisal on the property
  • A selected mortgage program
  • A rate commitment

Note as well, that many pre-approvals will include an expiration date, most typically 90 days after the date of issuance.

You don’t always need pre-approval

In certain situations, it makes sense to skip mortgage pre-approval. For example, if you are just beginning to find out what areas are right for you or what you truly want in a home, then it’s wise to wait until you have a budget and other specifics in mind.

If you expect that your credit score is going to improve significantly between the day you start looking and the day you are likely to buy, then it may make sense to wait to apply for a loan. However, if you have a decent idea of what you are looking for and your finances are in order then it makes sense for most people to get pre-approval as soon as possible.

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Eliza writes for both PropertyShark and CommercialEdge. Reach her at [email protected]

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