If you're planning to buy soon, getting pre-approved is one of the most important early steps. It can save you time, and it can save you money.

What is a mortgage pre-approval?

A pre-approval is a letter from a lender that shows how much you can borrow for a new home. The amount depends on your credit history and score, employment history, income, and assets. It speeds up the process and shows sellers you're serious, which can give you an edge when you make an offer.

Pre-approval vs. pre-qualification

• Pre-qualification is a preliminary estimate of what you might be able to borrow, based on your finances. It's a useful first step if you're unsure what you can afford, but it isn't a pre-approval.
• Pre-approval is a thorough review. The lender looks at your employment history, gross monthly income, and credit score, and asks for documents such as pay stubs and tax returns. That gives you a more accurate borrowing figure.

When to get pre-approved

As early as possible, ideally before you start your home search. The process takes time, and knowing your approved amount lets you focus on homes in your price range and bid with confidence.

Documents you'll need

• Identification, such as a driver's license or passport
• Social Security number
• Proof of income, such as pay stubs and tax returns
• Employment verification, such as an offer letter or employment contract
• Bank statements
• Your credit score
• Details on your assets

Self-employed or paid on a 1099? Your documents may look a little different. See our non-QM loans page for options.

How to improve your chances

• Check your credit. Review your score and report to see where you stand and what needs work.
• Pay down credit card debt. Lower balances can improve your odds of approval and may help you get a better rate.
• Save for a down payment. Many loans require at least 5% of the purchase price, though some programs ask for less. A larger down payment generally helps lower your rate, and 20% down helps you avoid private mortgage insurance.
• Watch your debt-to-income ratio. Lenders compare your debts to your income to decide how much you can afford to borrow.

How long it takes

Usually a few days to a few weeks, depending on how quickly you gather your documents and how responsive your lender is.

1. Submit your application
2. The lender reviews your documents and determines eligibility
3. If you're eligible, you receive a pre-approval letter
4. Use the letter to shop for homes in your range

A pre-approval letter is not a guarantee of final loan approval.

What it does to your credit

Pre-approval usually involves a hard inquiry, which can lower your score by a few points temporarily. If you're buying soon, the impact is typically minor. The inquiry stays on your report for 12 months, and its effect fades over time.

How long a pre-approval lasts

Typically 60 to 90 days. If you're still shopping after it expires, you'll need a new one. If you find a home before it expires, you can usually still use it. Sellers often accept offers contingent on loan approval, so you'll need to be approved within the contingency period.

Benefits of being pre-approved

• You know your budget. You can skip homes outside your price range.
• A stronger negotiating position. Sellers are more likely to welcome offers from pre-approved buyers.
• A faster closing. With underwriting already underway or complete, final approval can move quickly once you find the right home.

Bottom line

Getting pre-approved first puts you in control of your search. Learn more here, or reach out and our team will walk you through it.

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Examples shown are general and vary by lender, loan type, and borrower. A pre-approval is not a commitment to lend.