How to Get Pre-Approved for a Mortgage

To get pre-approved for a mortgage, be ready to provide information about your employment, income, debts, and financial holdings.

Buying a home starts once you contact a lender and are pre-approved for a mortgage, although browsing glossy listings online may fuel your fantasies about your ideal home. A mortgage pre-approval, though not required, reveals how much money a lender is willing to loan you and the kind of mortgage you qualify for. The lender will give you a letter of pre-approval once the procedure is finished.

You can get similar information about your estimated credit limit by pre-qualifying, an informal process involving self-reported financial data. Conversely, a pre-approval is supported by financial documents, so a pre-approval letter from the lender is essential. A pre-qualification can be a helpful way to set a realistic budget, while a pre-approval letter lets real estate agents and home sellers know that you can get financing and are ready to buy a home.

Once you've tracked down all the necessary information, you can look for lenders who might be a good fit. Many of them have a pre-approval portal on their websites.

Main Road

You must submit pre-approved documents, including a Social Security number, proof of income, banking information, and tax forms. (Use the Pre-Approval Documents Checklist.)

You'll want to keep your financial ducks in a row before applying. This may include making errors on your credit report or paying off existing debts to show lenders you can afford a mortgage.

Pre-qualification is a more relaxed and informal way to assess your readiness to buy a home. At the same time, pre-approval is a more involved process best suited for borrowers who are ready and motivated to buy.

Your pre-approval will likely expire in three months or less.

5 Steps to Get Pre-Approved for a Home Loan

1. Get your free credit score. It helps to know where you stand before approaching a lender. To be eligible for a mortgage, you should have a credit score of at least 620; higher scores will qualify you for better rates. You can get the best mortgage rates if your credit score is 740 or higher. You'll want to get your score as high as possible before embarking on your home-buying journey, but you can also focus on lenders who specialize in working with low-score borrowers when needed.

2. Check your credit history. Ask for copies of your credit reports and discuss any errors. Work with creditors to settle any outstanding debts if you discover any before applying.

3. Calculate your debt-to-income ratio. The percentage of your gross monthly income used to pay off debt, such as credit cards, student loans, and auto loans, is your debt-to-income ratio, or DTI. NerdWallet's debt-to-income calculator can help you estimate your DTI based on current debt and potential mortgages. Lenders prefer borrowers with a DTI of 36% or less, including possible mortgage payments, although it can sometimes be higher. If your monthly payments are prohibitively high, you may need to refinance, sign up for an income-based payment plan, or pay down your debt more aggressively before getting a mortgage.

4. Collect income, financial account, and personal information. This includes your and, if applicable, your co-borrower's Social Security numbers, current addresses, and employment information. Your W-2 and 1099 tax forms are required documents to obtain a mortgage pre-approval letter if you have additional sources of income and pay stubs. Although there are some exceptions, lenders prefer two years of continuous employment. Self-employed applicants will likely need to provide two years of income tax returns. If your down payment comes from a gift or sale of an asset, you'll need paper records to prove it.

5. Contact more than one lender. You can compare rates and fees on a 30-year mortgage and save thousands of dollars by comparing offers from different lenders. Because pre-approval involves extensive research, your credit score may take a slight (but temporary) hit. However, since all your applications relate to one loan, you will only be penalized once instead of by every lender that pre-approved you. FICO, one of the largest credit scoring companies in the U.S., recommends limiting these requests to a limited period, such as 30 days.

Pre-approval is not the same as pre-qualification.

A pre-qualification is an excellent first step when determining if you're financially ready to buy a home. An informal evaluation of your finances typically serves as the foundation for mortgage pre-qualification. You tell the lender about your credit, debt, income, and assets, and the lender estimates whether you might qualify for a mortgage and how much you can borrow. With the help of our mortgage pre-qualification calculator, you can determine your readiness.

If you proceed during pre-qualification, pre-approval is the next step. During pre-approval, a lender pulls your credit report and reviews documents to verify your income and assets.

How much pre-approval do I need for a mortgage?

A mortgage pre-approval is an offer from a lender to lend you a certain amount under certain conditions. The offer expires after a certain period, such as 30 or 90 days. It's essential to read the fine print and be aware of how long your pre-approval letter is valid, but in any case, when you're ready to start your serious home search and prepared to make an offer. You must apply.

Getting pre-approved isn't a guarantee that you'll get a loan, and a mortgage can still be rejected. A home appraisal should be completed before closing on a loan to ensure you pay less for the home than it is worth. Also, the lender's offer may not be valid if your financial situation changes between pre-approval and closing.

This is why it's so important to avoid any financial moves after pre-approval that could make you appear riskier to lenders. Things not to do after being pre-approved for a mortgage include applying for new credit, creating a large purchase, or defaulting on your loan or credit card. And debts. If you are confident in your credit and financial ability to buy a home and are ready to start shopping, you can skip the pre-qualification stage and go straight to pre-approval.

How much pre-approval do I need for a mortgage?

A mortgage pre-approval is an offer from a lender to lend you a certain amount under certain conditions. The offer expires after a certain period, such as 30 or 90 days. It's essential to read the fine print and be aware of how long your pre-approval letter is valid, but in any case, when you're ready to start your serious home search and prepared to make an offer. You must apply.

Getting pre-approved isn't a guarantee that you'll get a loan, and a mortgage can still be rejected. A home appraisal should be completed before closing on a loan to ensure you pay less for the home than it is worth. Also, the lender's offer may not be valid if your financial situation changes between pre-approval and closing.

This is why it's so important to avoid any financial moves after pre-approval that could make you appear riskier to lenders. Things not to do after being pre-approved for a mortgage include applying for new credit, creating a large purchase, or defaulting on your loan or credit card.