How to Get Pre-Approved for a Home Mortgage

When you start shopping for a new home, you want to be sure you can truly afford to buy. Since most people don’t have the cash to buy a new home outright, chances are you will need a mortgage. It is wise to get pre-approved for a mortgage, so you don’t find that perfect home only to find out your lender won’t give you the money you need to buy it.

Getting pre-approved for a mortgage is a process that is recommended before you even start looking at homes. While the idea of getting a mortgage might seem daunting, it’s not as intimidating as you might think. Read on to find out how to get mortgage pre-approval.


Pre-Approved Mortgage Is Not the Same as Pre-Qualified Mortgage

The first thing to understand about mortgage pre-approval is that it is not the same as mortgage pre-qualification. While it may be a good idea to get pre-qualified for a mortgage, it does not guarantee you will get approved for a mortgage.

Essentially, mortgage pre-qualification is finding out from your lender what you may be approved for based on information that you provide verbally or by filling out a form. At this point, you are not providing any proof of your income or financial situation.

Mortgage pre-approval also doesn’t guarantee you will actually be approved, but it comes close. Pre-approval takes mortgage pre-qualification to the next level. To get pre-approved for a mortgage, you must provide verification of all your financial information. Information your lender will need includes:

  • Credit score
  • Credit history
  • Debt-to-income (DTI) ratio
  • Income
  • Employment history
  • Assets and liabilities

This will provide your lender with enough information to determine whether you are a risk or whether you can be trusted to pay a mortgage. If your information paints a good picture of your financial situation, you will get a letter of pre-approval.


When to Get Mortgage Pre-Approval

The ideal situation is to get mortgage pre-approval six months to a year before you plan to buy. This will tell you exactly what your financial situation is, so you know if you are ready to buy. It will also give you time to save your down payment and closing costs and improve your credit score if required before you begin house hunting and apply for your actual mortgage.

Keep in mind that when you make an offer on a house, the seller typically wants to see a copy of your mortgage pre-approval. This gives them assurance that if they accept your offer, you will follow through with the purchase. This is especially the case in a seller’s market in which there are many offers on a house.


What You Need for Mortgage Pre-Approval

To get a mortgage pre-approval, you will need the following:

Proof of Income

There are a number of documents that must be submitted to prove your income. These include:

  • W-2 wage statement that goes back two years
  • Pay stubs that show current income and year-to-date income
  • Proof of any additional income
  • The last two years of tax returns


Proof of Employment

Lenders require you to prove your employment is stable and pay stubs may not be enough. Your lender is also likely to call your employer to verify your employment status and income. They may even call your previous employer if you changed jobs recently.

If you are self-employed, you will need to provide even more paperwork to prove your income and employment stability to finance a home. You will need to provide the last two years of tax returns, as well as documentation that will show:

  • The stability of your income
  • The nature of your business
  • The demand for your product or service
  • The financial strength of your business
  • The ability of your business to continue to generate an income that is sufficient to make your mortgage payments


A Good Credit Rating

It is standard for lenders to require a FICO score of 620 or higher to qualify for mortgage pre-approval. A credit score of 760 or higher will get you the lowest interest rates.

If you are borrowing from the Federal Housing Administration (FHA), you may pre-qualify at a credit score as low as 580, provided you can put down 3.5%. The lower your credit score, the higher a down payment you will need to make and the higher your interest rate will be.


Proof of Assets

You will need to provide relevant bank statements and investment account statements to prove that you have additional assets and cash reserves that are sufficient to pay your down payment and closing costs. If your down payment is lower than 20%, you will also be required to pay for mortgage insurance.


Additional documentation

In addition to the above, you will need to provide your lender with your driver’s license, your Social Security number, and your signature. This will verify your identity and make it possible for them to do the credit check. If there is other paperwork required, you will be notified at your mortgage pre-approval session.


The Mortgage Pre-Approval Process

Once you have all your documentation in place, the mortgage pre-approval process will go as follows:


  1. You and your lender will determine all the loan details, including the loan type and amount, the length of time you have to repay the loan, and the interest rate you’ll pay.

  2. You will provide your lender with information about the property you are interested in, including the address, year built, whether it is a new build or resale, and whether it will be your primary, secondary, or investment residence.

  3. You will provide all your identifying information, Social Security number, how many years of school you attended, your marital status, whether you have dependents, and your address history. You will also provide all required information on your employment and proof of income.

  4. You will go over the details of your purchase, including the price of the home, the loan amount, estimated closing costs, discounts, the value of any improvements or repairs, and the mortgage insurance.

  5. You will provide your lender with any declarations, such as any liens on the property, past bankruptcies, delinquent debts, and past lawsuits.

  6. Once they have all this information, your lender will provide you with a three-page loan estimate within three business days. This document will let you know if you have been pre-approved and the terms of the agreement, including your maximum loan amount, interest rate, estimated closing costs, estimated property taxes, estimated homeowner’s insurance, estimated property taxes, and any other features of the loan.


Find out more about mortgage pre-approval and financing by contacting one of our experienced team members today .


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Published 02.17.22

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