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Everything You Need to Know to Get a Mortgage Preapproval

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If you’re getting attached to the idea of owning a home, you’ll need to know how to get a mortgage preapproval. A home loan preapproval provides a snapshot of what you can afford based on a lender’s guidelines.

Having a preapproval letter shows sellers you’re on solid financial ground, and many sellers won’t consider your offer without one. Here are some tips for getting a mortgage preapproval as you begin the homebuying process.

What is a mortgage preapproval?

A mortgage preapproval reflects what a mortgage company might lend you based on a preliminary review of your finances. During the home loan preapproval process, a lender typically pulls your credit, looks at your debt and income and verifies that you have enough money for a down payment and closing costs.

The preapproval letter details the loan program and the maximum loan amount you can borrow. Most importantly, the new payment should fit your current and future financial plans. Lenders don’t consider other monthly bills like daycare, college expenses, utilities or groceries when issuing a mortgage preapproval.

Preapproval letters are good for 30 to 60 days, according to the Consumer Financial Protection Bureau (CFPB). When you make an offer, your real estate agent will submit a copy of the preapproval letter to the seller.

What is mortgage prequalification vs. preapproval?

Lenders and real estate agents may use the terms prequalification and preapproval interchangeably, but they’re not technically the same. Getting prequalified for a mortgage is based on a casual conversation about your credit, earnings, debt and down payment funds. But when you get preapproved for a mortgage, the lender does a deeper dive into your finances and credit.

Even if you run a very tight financial ship, the preapproval process may reveal red flags missed in a quick prequalification chat. For example, a preapproval might dig up:

  • A cosigned car loan or student loan
  • Ownership of rental property
  • A recent change from salaried pay to commission/bonus income
  • A large cash deposit from an unknown source

Before getting preapproved, it’s a good idea to find out where your credit stands. You can pull each of your credit scores for free online at AnnualCreditReport.com, and address any issues before getting a preapproval later.

5 tips to get preapproved for a mortgage

You can meet a lender in person or get a mortgage preapproval by phone or online. Some lenders even have apps to complete a loan application on your smartphone. The basic steps to getting preapproved are the same regardless of how you apply.

  1. Compare lenders. Compare rates from three to five different lenders before applying for a mortgage. Lower rates give you more qualifying power for your home loan preapproval. You’ll receive loan estimates from each lender within three business days of applying. Keep the estimates handy to negotiate the best interest rates and lower closing costs.
  2. Gather documents needed for mortgage preapproval. A preapproval is only as good as the information you provide. Gather the following paperwork before filling out an online mortgage application:
    • Current pay stubs
    • W-2s from the past two years
    • Federal tax returns from the last two years (if you’re self-employed or earn commissions)
    • Bank statements from the last 60 days
    • Employer contact information for the last two years
    • Addresses where you’ve lived in the past two years
  1. Apply for a mortgage loan. With your paperwork in hand, start filling out the loan application and double-check that your entries are correct before you submit it.
  2. Find out what your credit scores are. Your lender will pull your credit and go over any issues it shows.
  3. Get your mortgage preapproval letter. Once a loan officer reviews your application, you’ll receive a preapproval letter based on the maximum loan the lender can offer. Provide it to your real estate agent when you’re ready to make offers on homes.

FAQs about mortgage preapproval

How long does a preapproval take?
Depending on the lender, you can get a mortgage preapproval the same day you apply, or it can take several days. However, if you have credit bumps or are self-employed, it could take longer. Ask lenders upfront what their timeline looks like.

How much can I get preapproved for?
The amount you may be preapproved for depends on how much you put down, the type of loan you apply for and your total DTI ratio. The CFPB recommends a total DTI of no more than 43%. Use a home affordability calculator to get an idea of how much you might be able to afford. Take into account other monthly bills that aren’t factored into your preapproval (education, day care, health care, etc.) to ensure you can handle the monthly payment that comes with the loan amount being offered.

Does getting preapproved hurt your credit score?
As long as you keep your mortgage shopping activities within a 45-day period, mortgage credit inquiries will have little effect on your credit scores. However, you still may see a credit score drop if you apply for other types of credit.

What if I’m denied for a preapproval?
First, find out why you were turned down, and ask your loan officer how to fix the problem so it’s not flagged again. Second, if the loan denial was because your DTI is too high, consider buying a less expensive home or paying down debt.

Is it possible to get preapproved for a loan and then denied before closing?
Yes. For example, a drop in your credit score or a low home appraisal could flip an approval to a denial. To avoid a loan denial or closing delay, don’t open new credit card accounts, rack up additional debt, change jobs or make large cash deposits into your bank account before closing.


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