How to get pre-approved for a mortgage

Are you ready to buy a home? Here’s what you need to know about mortgage preapproval. (iStock)

Did you know that prequalifying and preapproval for a mortgage aren’t the same thing? Prequalifying for a loan lets a lender tell you how much money you could qualify to receive. When a lender preapproves your credit, they make a conditional agreement to offer you a set mortgage amount.

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While prequalifying is a helpful step to narrowing your home search, you should seek mortgage preapproval before shopping for a home. A preapproval can save you a lot of time and heartache. In the event of multiple offers on a home, buyers with preapproval are more likely to win over a buyer who has no financial backing when they submit their proposal.


Most borrowers can prequalify for a loan in a few minutes or hours. If you want preapproval, expect it to take at least a few days. If your credit is less than perfect, it can take even longer.

It’s important to note that a preapproval only lasts for 60 to 90 days, so you should be ready to get serious about picking a house once you receive the green light from your lender.

If you're ready to get serious about buying a home, here are the next steps you should take:

Know your credit score

Before submitting any paperwork or touring homes, get a copy of your credit score in your hands. There are several ways to access your credit score, including paying one of the three major credit bureaus for access. Alternatively, major credit card companies like American Express, Discover, and Capital One offer a free credit score updated once per month.


The Federal Housing Administration (FHA) will offer loans to borrowers with a score below 580, but they require a down payment of at least 10 percent. Borrowers with a credit score of higher than 580 may qualify for a lower down payment of 3.5 percent. If you want to be eligible for a VA, USDA, or conventional loan, you should have a credit score of at least 620.

Understand your debt-to-income ratio

Although other factors affect your credit score, one of the most important things that will determine how much, if any, money a lender is willing to give you is your debt-to-income ratio (DTI). You can calculate your debt-to-income ratio by dividing your debt payments by your gross income.

For example: If you pay $2,000 a month in debt (car payment, mortgage, credit card bills, loans, etc.) and you bring home $5,000 per month, your DTI is 40 percent. A lender will factor in your potential mortgage payment when deciding how much to let you borrow. The Consumer Financial Protection Bureau notes that most lenders only allow a maximum of a 43 percent DTI, though lenders prefer to see a number closer to 30 percent or lower.

Gather documents

Once you’ve reviewed your credit score and debt-to-income ratio, begin putting your paperwork together. Set up a digital folder on your computer or keep a manila folder in a safe place. You’ll want to have the following documents on hand:

  • Tax documents from the past two years
  • Pay stubs or W2s for proof of income
  • Any 1099s or other materials for miscellaneous or self-employment income
  • A letter documenting any monetary gifts you received to help with your down payment
  • Asset information (cars, other properties, retirement, IRA, investment accounts)
  • Debt information (credit card, personal loans, etc.)
  • Any information about child support or other legal obligations
  • Proof of the rent you’ve already been paying

Your lender will also pull your credit report to verify and update any information.

Research your lending options

Now it’s time to research different lender options. Check out the interest rates and APRs. Don’t forget to ask them about any extra fees they add to your loan. You can apply with multiple lenders if you want to get a more accurate interest rate. If you apply to multiple lenders within a few weeks, they are lumped together for minimum impact on your credit score. Don’t be afraid to ask questions. Ask about down payments, loan origination fees, discount points, whether they offer fixed-rate or variable mortgages, and whether the lender can approve loans in-house.

Stay steady

Once you are ready to apply for a mortgage, put your credit cards away and don’t use them again until you have the keys to your new home in hand. Buyers can (and have) lost a preapproval buying furniture for their new home on credit.

You’ll also want to avoid switching jobs, opening new lines of credit, making late payments, or changing bank accounts. Try to keep your financial transactions as simple as possible, so your lender doesn’t have a reason to back out of the preapproval.

Buying a house is exciting! But the loan process can be intimidating. Taking steps early on to get a preapproval and then staying responsible is the best way to ensure you snag the home of your dreams.

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