How to Get Pre-Approved for a Mortgage

Buying a home is one of the most significant financial decisions you’ll ever make. Before you start house hunting, getting pre-approved for a mortgage is a crucial step that can save you time, strengthen your offer, and give you a clear budget.

In this guide, we’ll walk you through the mortgage pre-approval process, what lenders look for, and how to improve your chances of securing the best loan terms.

What Is Mortgage Pre-Approval?

A mortgage pre-approval is a lender’s conditional commitment to lend you a specific amount of money for a home purchase. Unlike a pre-qualification (which is a rough estimate), a pre-approval involves a thorough review of your financial history, including credit checks, income verification, and debt assessment.

Why Is Pre-Approval Important?

1. Sets a Realistic Budget – You’ll know exactly how much you can borrow.
2. Strengthens Your Offer – Sellers take pre-approved buyers more seriously.
3. Speeds Up the Closing Process – Much of the paperwork is done upfront.
4. Identifies Potential Issues Early – You can fix credit or income problems before house hunting.

Step-by-Step Guide to Getting Pre-Approved

1. Check Your Credit Score

Your credit score is one of the most critical factors in mortgage approval. Lenders prefer borrowers with scores of 620 or higher (for conventional loans), while FHA loans may accept scores as low as 580.

How to Improve Your Credit Before Applying:

• Pay down credit card balances (keep utilization below 30%).
• Avoid opening new credit accounts before applying.
• Dispute any errors on your credit report (get free reports from AnnualCreditReport.com).

2. Calculate Your Debt-to-Income Ratio (DTI)

Lenders evaluate your DTI ratio (monthly debt payments divided by gross monthly income) to assess affordability. Most lenders prefer a DTI below 43%, though some may allow up to 50% with strong credit.

Example:

• Monthly income: $6,000
• Monthly debts (car loan, student loans, credit cards): $1,800
• DTI: $1,800/$6,000 = 30%

3. Gather Necessary Documents

Lenders require proof of income, assets, employment, and identity. Prepare:

• Income Verification:

  • Pay stubs (last 30 days)

  • W-2s or 1099s (past 2 years)

  • Tax returns (past 2 years)

• Asset Documentation:

  • Bank statements (last 2 months)

  • Investment account statements

  • Gift letters (if using gifted funds for down payment)

• Employment Verification:

  • Contact information for your employer

  • Recent employment history (if self-employed, provide profit/loss statements)

• Identification:

  • Driver’s license or passport

  • Social Security number

4. Compare Lenders & Loan Options

Not all lenders offer the same rates or terms. Shop around with:

• Banks (Chase, Wells Fargo)
• Credit Unions (often lower fees)
• Online Lenders (Rocket Mortgage, Better.com)
• Mortgage Brokers (can compare multiple lenders)

Types of Loans to Consider:

• Conventional Loans (5%-20% down, best for strong credit)
• FHA Loans (3.5% down, lower credit requirements)
• VA Loans (0% down for veterans/military)
• USDA Loans (0% down for rural buyers)

5. Submit a Pre-Approval Application

Once you choose a lender, complete their pre-approval application (usually online or in person). They’ll run a hard credit check, which may temporarily lower your score by a few points.

6. Review Your Pre-Approval Letter

If approved, you’ll receive a pre-approval letter stating:

• The loan amount you qualify for
• Interest rate (may be locked or floating)
• Expiration date (typically 60-90 days)

Note: A pre-approval is not a final loan commitment—the lender will still verify details before closing.

Common Reasons for Pre-Approval Denial (And How to Fix Them)

Even with good credit, some applicants face rejection. Common issues include:

1. High Debt-to-Income Ratio

Solution: Pay down debts or increase income (e.g., side hustle).

2. Low Credit Score

Solution: Improve credit by paying bills on time, reducing debt, or using a credit-builder loan.

3. Insufficient Down Payment

Solution: Save more or explore low-down-payment programs (FHA, VA, USDA).

4. Unstable Employment History

Solution: Wait until you’ve been at your job for at least 2 years (or explain gaps if self-employed).

5. Recent Large Purchases or Credit Inquiries

Solution: Avoid opening new credit lines before applying.

What to Do After Getting Pre-Approved

1. Start House Hunting – Work with a realtor to find homes within your budget.
2. Avoid Major Financial Changes – Don’t take on new debt or change jobs.
3. Lock Your Rate (If Possible) – Rates fluctuate; locking in can save money.
4. Submit a Strong Offer – Sellers favor pre-approved buyers.
5. Complete the Full Underwriting Process – The lender will verify all details before final approval.

Final Tips for a Smooth Mortgage Process

Conclusion

Getting pre-approved for a mortgage is a smart move that puts you ahead in the competitive housing market. By understanding your budget, improving your credit, and choosing the right lender, you’ll be well-prepared to make a strong offer on your dream home.

Start the pre-approval process today—your future home awaits!