Mortgage Pre-Approval: What It Is and How to Get Ready

Before you fall in love with a house, it helps to know what you can comfortably borrow. That is exactly what a mortgage pre-approval gives you. It is one of the most useful first steps in buying a home, and it is much less mysterious than it sounds. Think of it as a financial checkup that tells you, and the sellers you make offers to, that you are ready to buy.

What a Pre-Approval Actually Means

A pre-approval is a lender’s review of your income, assets, debts and credit, resulting in a letter stating how much you may be able to borrow and on what type of loan. It is based on documents you provide, not just numbers you type into a form, which makes it more meaningful than a quick prequalification.

A few things to keep in mind:

• It is about you, not the house. The pre-approval covers your borrowing ability. The specific property still needs an appraisal and other review later.
• It is conditional. Final approval depends on things like the appraisal, title and confirming nothing major has changed in your finances.
• It has a shelf life. Letters are typically good for a limited time, so it is best to get one when you are ready to start shopping seriously.

Why It Gives You an Edge

Sellers and their agents want to know an offer can actually close. A pre-approval letter shows you have already done the homework with a lender, which can make your offer more appealing, especially when other buyers are interested in the same home.

It also helps you. Knowing your range keeps your search focused and helps you avoid touring homes that are out of reach. And because much of the paperwork is gathered upfront, the path from accepted offer to closing tends to move faster. That can matter when a seller is comparing offers with similar prices and wants the one most likely to close on time.

Documents to Gather

Every loan file is a little different, and your loan officer will give you a specific list. Most borrowers can expect to provide:

1. Income proof: Recent pay stubs, W-2s and often tax returns. If you are self-employed, expect to share business and personal tax returns and possibly a year-to-date profit and loss statement.
2. Employment details: Employer contact information so your job can be verified.
3. Identification: A government-issued photo ID and your Social Security number.
4. Asset statements: Recent bank and investment statements showing funds for your down payment, closing costs and any reserves.
5. Debt information: Details on car loans, student loans, credit cards, child support or other obligations.

Your lender will also review your credit. Any reputable lender will need to check it as part of a real pre-approval.

Tips for a smooth process

• Avoid opening new credit accounts or making large purchases on credit while you shop.
• Be ready to explain large deposits that are not from your regular paycheck.
• Keep working the same job if you can, and tell your loan officer right away about any change.
• Respond quickly when your lender asks for an updated statement or a letter of explanation. Fast answers keep your file moving.

Exploring Your Loan Options

A pre-approval conversation is also a great time to compare programs. Depending on your situation, you might look at conventional, FHA, VA or USDA financing, each with its own down payment and credit guidelines. For example, VA loans offer $0 down for eligible veterans with full entitlement, while some conventional loans allow as little as 3% down for eligible buyers. Our loan comparison page gives a quick overview, and first-time buyers can find extra guidance on our first-time home buyer page.

Ready to find out what you may qualify for? Contact FLO Mortgage and one of our loan officers will walk you through pre-approval step by step.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.