The Pre-Approval Process
What You Need to Know
A pre-approval letter is a statement from the lender that you qualify for a specific mortgage amount based on an underwriter's review of all of your financing information (credit report, pay stubs, bank statement, assets, salary, etc.).
The benefits of a pre-approval are two-fold:
- You’re armed with the knowledge of exactly what loan amount you can expect to be approved for, in order to shop for a home at or below that amount.
- When you present a pre-approval letter with your offer on a home, it shows the owner that you are serious and qualified
Your pre-approval application may only require a soft inquiry:
A soft inquiry or "pull" is a snapshot of your credit score when it is pulled. The good thing about soft pulls is that they have no impact on your credit score and they do not generate an inquiry on your credit report. When you’re ready to move forward with an official loan application, that is when a hard inquiry (or "pull") is done.
Pre-Approval Road Map
Gather Your Documents
In order to get pre-approved you will likely need to present documentation that substantiates the information you provide on your application, which may include the items listed here. Save time and avoid delays by having this information available.
- Pay stubs –last 30 days
- W2s –last 2 years
- Tax Returns (in some cases)
- Employment History
- Bank statements
- Realtor contact info
- Attorney contact info (if determined)
- Copy of photo ID
Filling out the application
You will typically be prompted to answer basic financial and employment questions. It can take as little as 15 minutes to complete your pre-approval application.
Basic information you may be asked includes:
- Type of loan you’re looking for (purchase/refi)
- Provide your martial status
- Provide co-borrower Information
- Provide your information, etc.
Importing Your Data
Most online pre-approval applications streamline the entire process by allowing your financial data is imported from your bank(s) to verify your income and assets, eliminating the need to supply copies of paper statements.
After answering only a few more questions on employment history, assets, liabilities, and declarations your pre-approval application will be processed and prepared.
Completed Application
Once completing your application, your loan officer may request any remaining documents to be sent over before issuing your official letter. Once approved, your loan officer will promptly send your pre-approval letter for us as your agents to use in your home search.
Common Questions
Why should I get pre-approved for a mortgage loan?
In recent years, mortgage guidelines have been tightened. Documentation requirements have been expanded and followed more closely. A pre-approval gets you through the process and uncovers potential pitfalls long before you become obligated by a contract to purchase.
What advantages will I have once pre-approved?
You'll be certain about the price range that's best for you. You'll know how much cash you'll need to close, and you'll know your maximum monthly payment. Understanding your limits will help you negotiate with confidence. Plus, since sellers like a sure thing, you'll have an advantage over buyers who may not have been through the process.
How long is the pre-approval valid?
Your pre-approval is typically good for the "shelf life" of the documents used. These will include a credit report, pay stubs, bank statements, W2s, tax returns, etc. The usable life of these documents will vary, yet it's usually safe to say that your approval is good for up to 3 or 4 months. During this time, it pays to file all important financial documents so they're readily available for future updates.
What if I change my mind?
That's perfectly fine. There's no obligation to purchase a home or use a particular loan program once you've been pre-approved. In fact, pre-approval simply helps to assure you know exactly what's involved, that you are comfortable in a particular price range and that you are truly ready to make your move.