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How to get a mortgage preapproval

And why getting preapproved for a mortgage is so important in 2024

Yahoo Personal Finance· Getty Images
Hal Bundrick
Updated 9 min read

There are many steps to getting or refinancing a mortgage — and preapproval just might be the most important. With a mortgage preapproval, a lender looks at your financial information and determines if you’re a good candidate for a mortgage loan. They’ll also evaluate how much money you can potentially borrow — an important detail to know as you start your home-buying journey. The preapproval process includes answering a few questions, submitting various financial documents, and, many times, agreeing to a credit check. You’ll want to go through this with multiple lenders to find the best offer. Here’s what the process looks like and how you can get started.

Read more: How to buy a house in 2024

A mortgage preapproval is a notch below final loan approval. Your finances are vetted to the extent that a lender feels comfortable estimating just how much they might loan you to buy a home — and at what interest rate.

A preapproval will usually require a credit check and some income and debt documentation. There is usually no charge for a preapproval from a lender.

Tip: Remember, a mortgage preapproval is not a firm commitment by a lender to offer you a loan. You also aren't under any obligation to take out a loan with the lender issuing the preapproval. But you'll have a good idea of your home loan options, what price range of home you'll likely qualify for and how much your monthly payment might be.

Read more: 5 strategies to get the lowest mortgage rates in 2024

The preapproval process is usually fairly quick. You’ll answer a few questions, send over some financial documentation, and often, agree to let the lender pull your credit report.

Here’s what the process usually looks like:

  1. Choose a few mortgage lenders. Try to select a mix of different types of institutions — maybe your main bank, a credit union, an online lender, and one other. This will ensure you have a good selection of rates and terms to compare and find the best mortgage lender.

  2. Answer the preapproval questions. These usually include what price range you’re shopping in, your annual salary, your monthly debts and, sometimes, your estimated credit score range, if the lender isn’t going to pull your full credit report.

  3. Gather the requested documentation. You’ll likely need to submit pay stubs to verify your monthly income, tax returns, bank statements, and other financial documents. If you’re a self-employed borrower, you’ll likely have to provide additional financial information.

  4. Wait for the lender to evaluate your information. The lender will look at the details and documents you provided and assess your financials. You should hear back within a few hours or days.

  5. Get your mortgage preapproval letter. If you get preapproved, the lender will give you a letter detailing your potential loan amount. You can then use this to guide your home search and submit it with any offers you make.

Keep in mind: Preapprovals don't last forever. They're typically good for between 60 and 90 days. Since that's quite a gap, be sure to ask your lender for the expiration date of its preapproval.

Read more: Pennymac mortgage review

If you want to go into the process with the best chance of getting preapproved — and for the loan amount you need — then work on increasing your credit score and paying down debts before you make contact with a lender.

The following factors will all impact your ability to get preapproved (as well as your loan amount).

  • Your monthly debt-to-income ratio. Your DTI is how much money you owe divided by how much money you make. A lower DTI usually qualifies you for lower interest rates and higher loan amounts, while a higher DTI does the opposite.

  • Your income and employment history. Lenders use this to determine how much house you can afford. They also want to see that you have consistent, reliable income coming in before they loan you money.

  • The loan-to-value ratio. Your LTV is how your loan amount compares to the total value of the house. If the home you’re buying is worth $400,000 and your mortgage loan is $300,000, your LTV is 75%. Lower LTVs mean less risk for the lender and typically qualify you for lower interest rates.

  • Your credit score and payment history. Lenders often pull your FICO score as a part of the preapproval process. They want to see a good score (typically 670 or higher) and a history of on-time bill payments.

Read more: How to get a mortgage

You’ll usually need to submit some financial documents as part of the preapproval process. Gathering these items early on can help your preapproval move faster and more efficiently.

You’ll typically want to pull together the following documents:

  • Bank statements from the last two months

  • Your last two pay stubs

  • Your last two years of tax returns and W-2 forms

  • Statements for any investment or retirement accounts

  • Business records, if you’re self-employed or a business owner

  • A copy of your driver’s license and Social Security number

  • Statements for any Social Security or pension payments you receive

The time frame for getting your preapproval letter varies by lender. While some lenders offer nearly instantaneous preapprovals, generally speaking, you can expect a preapproval letter within one to three business days.

Some lenders will offer a quick mortgage prequalification process online. Getting prequalified is usually not the same as a preapproval. A prequal is a lightweight lift, requiring little paperwork and usually no credit check. It's a rough idea of where you stand financially in the home-buying process — really just an estimate of your creditworthiness.

A mortgage preapproval is a much better gauge of your home-buying qualifications. A preapproval letter is a golden ticket to house hunting because real estate agents and home sellers will know you’re a serious buyer.

Tip: You really only need to get preapproved by one lender to get your house hunting underway. Once you have a purchase contract for a home in hand, you'll want to apply to a number of lenders to receive loan offers to compare.

After you’ve been preapproved, you can shop in your preapproved price range — preferably even below your price range, in case you have to offer more than the asking price. Protect your financial standing by avoiding additional monthly debt, changing jobs, or doing anything that might jeopardize your final loan approval.

You want your credit score and credit history to remain solid, or even improve a bit, before you sign a purchase contract, submit a mortgage application, and get loan offers from lenders.

Learn more: Getting a mortgage with a good (not great) credit score

The best time to get preapproved is before you begin shopping for homes. This is because your preapproval will tell you what your maximum purchase price is (what the lender is willing to loan you), and you’ll want to include your preapproval letter when submitting offers. It shows you’re serious about a home and can help you stand out from other buyers.

Don't panic. Talk to the loan officer, review your credit report with them, and ask for specific areas of your financial situation that need to be improved. If you need to reduce your debt, ask by how much. If you're aiming to qualify for too much house, ask what loan amount you might soon be best qualified for. The lender will be happy to walk you through the steps you need to take to get on the path toward preapproval.

There are many types of mortgage loans. Popular mortgage options include conventional loans, FHA loans, VA loans, USDA loans, and jumbo loans, among others. You can also choose between fixed-rate and adjustable-rate loans. Fixed-rate mortgage loans have the same interest rate for the entire loan term. Adjustable-rate mortgage loans have rates that change over time.

If you’re self-employed, you likely won’t have a W-2 to prove your income when applying for preapproval. You may also take more write-offs on your tax returns, making it look like you earn much less than you really do. For these reasons, you’ll usually need to prove your income using other methods — with bank statements or a profit-and-loss statement for your business, for example.

If you’re going to be using a down payment gift, you’ll need to have the person gifting you the money write a letter telling the lender it is not a loan and that you will not need to pay it back. The money also needs to be in your bank account for at least two months.

Mortgage preapproval letters usually last for a few months, at most. If yours expires, you’ll need to reapply, and your lender will issue a new letter, often with a different term and loan amount.

Preapprovals can sometimes affect your credit, though it depends on the lender. Some lenders pull your credit report as part of the preapproval process, which results in a hard inquiry and can hurt your credit score. Others don’t pull your credit until the full application process.

Yes, but it’s not necessary. You should, however, file a full application with multiple lenders, as this gives you several options to compare. Comparing lenders usually results in a lower interest rate and better mortgage terms. Just make sure to research each lender you apply with, check reviews, and see if they have any recent issues filed in the NMLS database.

A loan estimate is what your lender will give you after you’ve filled out your full loan application. It will detail your monthly mortgage payment amount, any PMI you’ll owe, and the closing costs and fees you’ll owe come closing day. Some of these terms may change based on the homeowners insurance policy you choose and other services you can shop around for.