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Each post is edited and fact-checked by industry experts to ensure that we are providing accurate information for our readers. See our full editorial guidelines. Author: Dan Green | Last Updated: October 25, 2022 Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
Getting pre-approved for a mortgage is straightforward, simple, and among the most important things you can do when you’re planning to buy a home. Mortgage pre-approvals are documents that verify you can get approved for a mortgage loan. Pre-approvals don’t mean you have a final approval – only the green light to shop around and find the perfect home. So, if you’re serious about buying a home, here’s how to get pre-approved for a mortgage.
Mortgage Pre-Approval Process for First-Time Home Buyers Table of Contents
What is a Mortgage Pre-Approval?A mortgage pre-approval is the questionnaire that’s the first step in buying a home. It tells a buyer which mortgages they can use and how much house they can buy. With their mortgage pre-approval completed, buyers can shop confidently, knowing that their offer to purchase a home will get approved. Pre-approvals perform a different function for mortgage lenders. Your pre-approval is a dress rehearsal for your actual mortgage approval with a lender. A pre-approval uses your job, your credit, and a fictional home to find:
It can also use your pre-approval to estimate mortgage closing costs and make your final approval happen faster. Freddie Mac suggests that getting pre-approved saves you money. How to Get Pre-Approved?There is a formula for getting a mortgage pre-approval. No matter your lender, plan to follow these basic steps. 1. Determine Your Monthly PaymentThe most crucial part of buying a home is being sure you can afford its payment. So, before you get pre-approved, decide how much you feel comfortable spending each month and write that number down. A mortgage lender may pre-approve you for a larger monthly payment. Stay within your budget. 2. Find a Mortgage Company To Pre-Approve YouMortgage pre-approvals are available for free through most mortgage websites with no obligation to proceed. Many home buyers get their mortgage from a different mortgage company that pre-approved them. So, don’t overthink this step. The critical part of getting your pre-approval is that you get it. Without a pre-approval, you cannot buy a home. 3. Locate Financial DocumentationAs part of your pre-approval, the lender may ask for supporting paperwork, including:
You don’t need them downloaded or on your hard drive in advance. Just know where to find these documents when you get asked. 4. Get Pre-ApprovedMortgage pre-approvals get processed online or in person. The simplest pre-approvals are self-service. Home buyers can get a free mortgage pre-approval from any mortgage lender or do a self-service pre-approval in under three minutes at Homebuyer.com. Get pre-approved for a mortgage today. What’s the Difference Between Mortgage Pre-Approval vs. Pre-Qualification?The difference between a pre-approval and pre-qualification is that mortgage pre-approvals get used to buy a home – pre-approval cannot. Home sellers accept pre-approvals as proof of a good offer because pre-approvals get backed by lenders and double-verified. They include credit verification and an assessment of monthly income. A pre-approved buyer can afford to buy a home. By contrast, pre-qualifications are weak. They include no verifications or reviews by a lender. By definition, a pre-qualification is non-reliable as evidence of a buyer’s ability to buy. As a result, sellers don’t accept offers from pre-qualified buyers. Learn more about pre-approvals vs pre-qualifications. How Far in Advance Should I Get Pre-Approved for a Mortgage?The best time to get pre-approved for a mortgage is at least one year before you decide to purchase. As a home buyer, pre-approvals are for your benefit, so it’s never too early to get one. Getting pre-approved early is an advantage because one-third of mortgage applications contain an error. These errors can negatively affect your interest rate and ability to buy a home. Pre-approvals uncover those mistakes and give you time to fix them. Getting pre-approved also sets your price range. Pre-approved buyers are less likely to overspend – or underspend! – on their residence as compared to buyers who use online mortgage calculators. Learn more about getting pre-approved before looking for a home. Do Pre-Approvals Affect Credit Score?Getting pre-approved lowers a buyer’s credit score by about five points temporarily. Credit scores range up to 850, so a five-point change is negligible. Doing a pre-approval doesn’t ruin your credit. Many home buyers use pre-approvals to increase their credit scores instead. Pre-approvals include a credit report, and one-in-three reports contain errors. Buyers can correct those errors and get a higher score. Higher credit scores are linked to lower mortgage rates. Learn more about how pre-approvals impact credit scores. How Long Does a Pre-Approval Take?Getting pre-approved takes a few minutes to ten days, depending on how and where you apply. Here’s how long they take from fastest to slowest: Standard: In-Person MeetingThe traditional way to get pre-approved is to schedule an in-person interview with an officer of a bank. Pre-approval meetings are restricted to hours when the bank is open, and loan officers often require multiple days to review and pre-approve an application. Follow-up meetings may be required. Faster: Online FormAnother way to get pre-approved is to complete a mortgage application online via a mortgage lender website, and financial documentation including W-2 statements, tax returns, and pay stubs. A lender will generally confirm your information within one day. Fastest: Self-Service Pre-ApprovalSelf-service pre-approvals are the fastest, easiest way for buyers to get pre-approved. Verifications are automatic. Buyers get instant answers in about three minutes, 24/7. Get pre-approved for a mortgage today. How Long Does a Mortgage Pre-Approval Last?Mortgage pre-approvals are valid for 90 days after you get one. If mortgage rates rise by at least one percentage point, you’ll need to get a new one. When a pre-approval expires, it’s no longer valid as proof for purchase. You should never use an expired pre-approval to set a maximum home purchase price or to craft a household budget. Expired pre-approvals can be renewed online or in person at any time. Buyers with lender-assisted pre-approvals may get asked to provide additional financial documentation, including pay stubs and proof of residency. Pre-approvals are also invalidated when a buyer changes jobs, income, or residence; or experiences an atypical drop in credit score. Learn more about how long a pre-approval is good for. Can You Get Denied a Mortgage After Being Pre-Approved?Yes, a home buyer can get turned down for a mortgage despite getting pre-approved. There are a few common reasons why pre-approvals aren’t always honored. 1. The buyer’s credit score dropped below the minimumMortgage pre-approvals are test runs for a buyer’s actual mortgage approval. So, if the buyer’s credit score drops before finding a home, the buyer’s pre-approval may be invalidated. In general, the minimum credit score requirements are:
Learn more about how to fix your credit score to buy a home. 2. The buyer lost income or piled on debtA home buyer’s ability to repay its mortgage gets based on Debt-to-Income(DTI). DTI is the amount of debt a buyer has compared to their income. Mortgage approvals cap a buyer’s debt-to-income ratio near 50 percent. If the buyer’s debt rises but their income stays the same, the pre-approval may get revoked at the point of purchase. 3. The buyer’s employer or job title changedChanging jobs – even for higher pay – can ruin your pre-approved mortgage. If you plan to make any of the following changes in your job or career, ask your mortgage lender before making the change:
It’s okay to make changes in your career. Be sure to speak with your lender to avoid unintended consequences. 4. The monthly payment is higher than pre-approvedMortgage pre-approvals simulate the purchase of generic homes at specific purchase prices. But, when buyers make offers on real homes, those approvals use real numbers. As part of the final approval, lenders replace pre-approval numbers with real numbers:
If the newly-calculated housing payment is higher than expected, the buyer’s pre-approval may be invalidated. Our Advice – It’s never too soon to pre-approve your mortgageThe best time to get pre-approved is when you start thinking about homes. Pre-approved home buyers get better rates and better homes. Getting pre-approved establishes your home purchase price range and minimum down payment and gives you time to edit and correct your credit. Most importantly, though, pre-approvals indicate seriousness about buying a home. Get pre-approved today in under 3 minutes. Get pre-approved for a mortgage today. Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat. Related postsSubscribe to our NewsletterReceive real estate and mortgage news by email weekly. |
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