A pre-approval tells you, and sellers, how much a lender is willing to lend. It takes a little paperwork, and it’s worth doing before you fall in love with a house.
Pre-approval is the lender’s conditional answer to a simple question: how much would we lend you, and on what terms? Sellers often expect to see one with an offer.
Step 1: Pull together your documents
Most lenders ask for:
- Proof of income: recent pay stubs and W-2s, or two years of tax returns if you’re self-employed.
- Bank and investment statements, usually the last two months, to show your down payment and reserves.
- Identification and your Social Security number for the credit check.
- Details of debts, such as car loans, student loans and credit cards.
Step 2: Know your debt-to-income ratio
Lenders compare your monthly debt payments, including the new mortgage, with your gross monthly income.
Example: with a gross income of $7,000 a month, a projected housing payment of $2,100 and $700 in other debt payments, your debt-to-income ratio is $2,800 ÷ $7,000 = 40%.
Many lenders look for a ratio around 43% or lower, though limits vary by program and by the rest of your application.
Step 3: Apply with more than one lender
Rates and fees differ, sometimes by a lot. Apply with two or three lenders within a short period. Credit scoring models generally treat multiple mortgage inquiries within a short window as one inquiry, so comparison shopping does little extra damage to your score.
Before you apply: check your credit reports for free at AnnualCreditReport.com and dispute any errors. A correction can make a real difference to the rate you’re offered.
Step 4: Read the letter carefully
A pre-approval letter states the loan amount, the program and any conditions. It isn’t final approval. The lender will still appraise the home, review the title and confirm nothing in your finances has changed.
Step 5: Keep things steady
Between pre-approval and closing, avoid changing jobs if you can, opening new credit or making large purchases on credit. Lenders often re-verify employment and credit right before closing.
Once you’re pre-approved, it’s time to think about how much to put down and whether you’ll pay mortgage insurance; that’s covered in down payments and PMI. Lenders’ offers are easiest to compare using the official Loan Estimate.
The short version
- Pre-approval is based on verified documents and a credit check; pre-qualification is only an estimate.
- Lenders focus on income, debts, credit history and the cash you have for the down payment and closing.
- Mortgage credit checks within a short window generally count as a single inquiry for scoring.
Readers also ask
How long does a pre-approval last?
Often 60 to 90 days, depending on the lender. After that, the lender may need updated documents.
Does pre-approval guarantee a loan?
No. Final approval depends on the home’s appraisal, title review and your finances staying the same until closing.
Should I open new credit cards before buying?
It’s best to avoid new credit and large purchases until after closing, because lenders recheck your credit.
This guide is general information about U.S. mortgages, not financial, tax or legal advice. Loan terms depend on the lender and on your credit, income and property, so confirm the details with your lender, and see consumerfinance.gov for official guidance.
