How To Get A Mortgage Preapproval
Victoria Araj6-minute read
December 15, 2020
It can be hard to shop for a home without knowing how much you can afford. Mortgage preapproval lets you shop smarter and make stronger offers. Let’s look at what it means to get preapproved and how to get started.
What Is A Mortgage Preapproval?
Preapproval is the process of determining how much money you can borrow to buy a home. To preapprove you, lenders look at your income, assets and credit score to determine what loans you could be approved for, how much you can borrow and what your interest rate might be.
Preapproval Vs. Prequalification
Preapproval and prequalification are both ways of understanding how much you’ll be able to get approved for. There are some slight differences between these two processes, though some lenders use these terms interchangeably.
A prequalification is like a preapproval, but it may not be as accurate. With a prequalification, you won’t have to provide as much information about your finances, and your lender won’t pull your credit.
Without your credit report, your lender can only give you estimates. This means the approval amount, loan program and interest rate might change as the lender gets more information. Because a prequalification is an initial review of your finances, you usually don’t need to supply documentation (like bank statements and pay stubs) during this stage.
Preapprovals are more in-depth than prequalifications. When you get preapproved, you may be required to provide information or documents like bank statements and pay stubs to prove your income and the funds you’re using to get the loan. A preapproval will also require a hard credit check so your lender can get your credit score and see how much other debt you have.
Preapproval Vs. Approval
A preapproval is helpful when you’re shopping for a home, but you’ll need to get a full approval once you find your home, and simply getting a preapproval doesn't guarantee you’ll get approved. For your lender, this process includes making sure the property details check out.
Here are a few property details your lender will need to approve:
- The appraisal value: Your lender will order an appraisal of the home to make sure you’re not paying more for the home than it’s actually worth. An appraisal that comes back lower than the purchase price could pose problems for your loan.
- The title: Your lender will work with a title company to confirm who owns the property and make sure there are no claims or liens against it.
- The home’s condition: Some loans require that the property meets certain standards before the loan can close. For instance, if you’re purchasing the home with an FHA loan, things like cracked windows, missing handrails or a roof in poor condition could keep the loan from closing.
How To Get Preapproved For A Mortgage
The preapproval process is essentially a mortgage application. This means your lender will want to take a comprehensive look at your finances. You should be prepared to provide information on the following:
- Proof of income
- Employment verification
- Proof of assets
- Credit history
- Debt-to-income ratio (DTI)
Before starting the preapproval process, you'll want the necessary documentation to ensure the process goes smoothly. Here are a few items you should have on hand:
- W-2 statements
- Pay stubs
- Bank statements
- Social Security number
Once you've submitted all your information to the lender, you can expect to receive your loan estimate within 3 business days, though this may be much shorter if you use an online lender. The loan estimate will let you know whether you've been preapproved and for how much.
When To Get Preapproved
Preapproval isn't just for your lender. Knowing how much mortgage you can expect to take out is also highly beneficial to you as a buyer, and it can help you narrow down and focus on your best options.
That means the best time to get preapproved is at the start of your home buying journey. If you know you're in the market for a new home, apply for preapproval now to get an early picture of your mortgage options and show agents you're a serious buyer.
Preapproval And Your Credit Score
Preapproval usually requires a hard inquiry into your credit. While this may cause your credit score to drop slightly, it won't hurt your credit in a significant way. Subsequent inquiries from other mortgage lenders within the same time period (usually about 45 days) won't affect your score at all.
The Mortgage Preapproval Letter
When you get preapproved, you usually get a preapproval letter. There are a few reasons the preapproval letter is important. First, real estate agents typically want to see your preapproval letter before they show you houses. This ensures they don’t waste time showing you homes outside your budget.
Second, the preapproval letter is something you can share with the home’s seller when you make an offer. It shows you won’t have problems getting financed for the amount you’re offering.
How Long Preapproval Lasts
Preapproval doesn't last forever. Check your expiration date and keep it in mind as you look at homes. Though it varies from lender to lender, preapproval is typically valid for 60 – 90 days. If you haven't settled on a house, you can request a renewal by giving your lender your most up-to-date financial and credit information.
Why Should I Get Preapproved?
If a preapproval doesn’t get you a loan right away, why get one? Preapprovals have several benefits:
- It’s easier to shop: Many real estate agents require you to get preapproved before you shop for a home. Preapprovals make the house hunting process easier for you and your real estate agent.
- It makes your offer stronger: If you’re shopping in a competitive housing market, a preapproval can be crucial to getting your offer accepted. Sellers aren’t just looking for the highest offer. They’re also looking for offers that aren’t likely to fall through. A preapproval tells buyers you can get financed for the amount you’ve offered.
- It gives you time to sort out issues: There are reasons both buyers and sellers may need to get to closing fast. Getting preapproved means you’re getting the bulk of the mortgage process done upfront. That way, once you’ve had an offer accepted, you can just focus on getting ready for your move.
Get Preapproved Online
If you’re looking to get preapproved for a mortgage, Rocket Mortgage® can help. Rocket Mortgage® offers a couple of different approval options:
- Our Prequalified Approval is the fastest way to get approved with Rocket Mortgage®. Simply apply online and allow us to check your credit. You won’t be required to provide any documents, but you should come prepared with information about your income and assets. You’ll have the option to sync your application with your bank accounts so we’ll know exactly how much you have available for your down payment and closing costs.
- Our Verified Approval℠ is a great way to strengthen your offer. To get one, you’ll need to apply with Rocket Mortgage® and then contact a Home Loan Expert. We’ll do a full verification of your income, assets and credit so sellers can be certain you won’t run into financing issues. Our Verified Approval℠ even comes with a guarantee.1
To get started with either approval option, apply now on Rocket Mortgage®.
Here’s how it works:
Step 1: Apply And Check Your Credit
Our online application asks you a series of questions to evaluate your eligibility for a home loan. You’ll give us information about yourself, the home you want to buy, your income and your assets. From there, we’ll check your credit so we can offer you accurate mortgage solutions.
Step 2: See And Customize Your Mortgage Solutions
See your recommended mortgage solutions and adjust your numbers to fit your budget. This is where you’ll see how much we can approve you for, as well as recommended loan types, down payments, monthly payments and interest rates.
Step 3: Get Your Approval Letter
Once you’ve chosen your mortgage option, you can see if you’re approved for it. From there, we’ll give you a Prequalified Approval Letter that you can use to shop for homes. For an even stronger approval, you can contact a Home Loan Expert to get a Verified Approval℠.
A preapproval is a great first step toward buying a home. Once your financial information is verified, you'll have a clear idea of how much home you can afford. Getting preapproved before you start your house hunt benefits everyone involved.
To get started, apply online now with Rocket Mortgage® by Quicken Loans®.
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