How to get preapproved for a mortgage
Quick insights
- Mortgage preapproval is a lender’s tentative offer to lend a certain amount for a home purchase based on the borrower’s financial and personal information. Preapproval is not a final loan approval or guaranteed offer.
- While not required, mortgage preapproval helps buyers understand how much they may be able to borrow, their potential budget and the loan types they could qualify for.
- Getting preapproved generally requires your personal and financial information, along with a credit check. Many lenders offer online preapproval options where you can submit information and documents.
Getting preapproved for a mortgage is one of the most important early steps in the homebuying process. A mortgage preapproval is lender’s conditional offer stating how much you may be eligible to borrow based on a review of your income, credit score, assets and debts. While it’s possible to start house hunting without one, a preapproval helps clarify your budget and signals to sellers that you’re a serious, financially prepared homebuyer.
What is mortgage preapproval?
A mortgage preapproval (often referred to as a preapproval letter) is a written statement from a lender indicating how much you may be eligible to borrow for a home purchase. It’s typically based on a review of the borrower’s financial information including income, assets, debt obligations, credit history and a credit check (a hard inquiry on your credit report).
Here’s what is usually standard in a preapproval letter:
- Maximum loan amount: The specific total dollar amount the lender is willing to lend you based on your financial assessment.
- Interest rate: The estimated interest rate you have been approved for, which helps determine your buying power.
- Loan type and term: Specifies whether the loan is conventional, FHA or VA, along with the length of the repayment period, such as 30-year fixed.
- Total monthly mortgage: An estimate of your monthly obligation, including principal, interest, taxes and insurance.
- Expiration date: Preapproval letters are typically valid for 60 to 90 days, reflecting the shelf life of your credit report and financial data.
- Lender contact information: Validates that the letter is from a legitimate financial institution and provides a point of contact for the seller’s agent.
- Conditions for final approval: A list of items that must remain stable or be verified (such as a satisfactory appraisal of the home and continued employment) before the loan is fully funded.
While mortgage preapproval is not a final loan approval or guaranteed offer, it signals to sellers that a first-time homebuyer is likely able to secure financing. For this reason, many sellers require buyers to submit a preapproval letter when making an offer. Obtaining a preapproval letter can help you better understand your potential loan options and allow you to shop with a realistic price range.
Mortgage prequalification vs. preapproval vs. final approval
The terms mortgage prequalification and mortgage preapproval are often used interchangeably. The biggest difference between them is what you need to provide, what each one tells you and how much weight they hold in the mortgage application process.
Mortgage prequalification provides an estimate for how much house you can afford. The number is based on information provided by the borrower and doesn’t go through an official verification process. More importantly, it isn’t an official qualification. Chase does not offer mortgage prequalification.
Mortgage preapprovals formally verify the borrower’s financial information and provide real parameters for a loan. If the borrower applies while the approval is active and nothing major has changed with their finances, they are likely getting approved for the loan in the preapproval letter.
Final mortgage approval means you’re officially authorized for a loan and guaranteed to receive the financing detailed to you after going through the official mortgage application process.
How to get a mortgage preapproval
The process for getting preapproved for a home loan may vary by mortgage lender, and most offer an online preapproval or prequalification option with step-by-step instructions. Generally, getting preapproved involves preparing your financial information, submitting documentation and allowing a loan provider to review your credit and overall financial profile.
1. Prepare your finances
Before applying for a mortgage preapproval, it can be helpful to review your financial situation and personal goals to understand how a loan provider may evaluate you. This includes considering how much you have saved for a down payment, whether you plan to use gift funds from a friend or relative and how your existing debt obligations compare to your income.
Checking your credit score and estimating your debt-to-income ratio (DTI) ahead of time may also help you anticipate how favorably a mortgage lender could view your application and whether you’re shopping within a reasonable price range.
2. Gather relevant documents
To get preapproved for a mortgage, loan providers will typically ask you to submit documentation to help verify your financial information. Commonly requested documents may include:
- Proof of identity (driver’s license or passport)
- Proof of income (recent pay stubs or W-2 statements)
- Proof of assets (bank statements, investment account summaries or retirement accounts)
- Proof of debts and expenses (loan statements, credit card bills or rent payments)
- Estimated down payment amount and the source of the money
Having these materials ready in advance can help streamline the process of getting preapproved.
3. Shop for lenders
Borrowers are not limited to getting preapproved by just one lender. In fact, comparing preapprovals from multiple loan providers can help you evaluate loan options, mortgage interest rates and overall competitiveness. When multiple mortgage-related credit inquiries occur within a short time period, they are usually treated as a single inquiry for credit scoring purposes. This may help limit the impact on your credit score.
4. Submit a preapproval application
Once you’ve selected a mortgage lender, you can typically submit a mortgage preapproval application online or at a local branch. During this step, you will provide your financial information and authorize the loan provider to review your credit. It’s important to note that a mortgage preapproval is not a formal mortgage application and does not commit you to moving forward with that lender.
5. Receive a preapproval letter
If you are approved, the loan provider will issue a mortgage preapproval letter outlining important details of your tentative loan offer. This letter usually includes the maximum loan amount you may qualify for, the estimated interest rate, the loan type and the term length. Homebuyers can share this letter with real estate agents or sellers to demonstrate financial readiness when making an offer on a home.
Can I get multiple mortgage preapprovals?
Yes, you can get mortgage preapproval from multiple lenders. In fact, it can be a way for you to shop around and negotiate the mortgage interest rate. For example, one lender may offer a lower interest rate, while another loan provider may provide different loan programs or qualification criteria (such as smaller down payment requirements, adjustable-rate options or unique first-time homebuyer programs). Reviewing multiple preapprovals can help you determine which offer fits your personal financial situation and homebuying goals.
Can my mortgage rate change after preapproval?
A mortgage rate may change after preapproval under certain circumstances. Common reasons include:
- If there are any significant changes in your personal finances. For example, taking on new debt, changing jobs or experiencing a drop in income could affect the loan terms a mortgage lender is willing to offer.
- There are changes in the economy that impact interest rates. Interest rates can fluctuate due to changes in the broader economy, such as inflation trends or adjustments to benchmark rates, even if your financial situation remains the same.
How long does mortgage preapproval take?
Depending on the lender and how in-depth the process is, mortgage preapproval can take 1 to 3 business days. Some mortgage preapprovals will automatically return a number to the borrower depending on the information they’ve provided about themselves and their finances. Other preapproval processes may be in-depth and involve a credit check that could take up to a few days.
In summary
Mortgage preapprovals help borrowers understand what kind of home loan they can expect to qualify for. It’s helpful to get preapproved for a mortgage as you gear up to put an offer in on a home, as it’s often required by the seller. Getting multiple preapprovals may help you find the rate that works for you. However, do note that preapprovals expire after a certain period and may not be identical to the loan you ultimately qualify for once approved.
Mortgage preapproval FAQs
1. What happens if my mortgage preapproval expires?
Mortgage preapproval typically lasts 30 to 60 days. If your mortgage preapproval letter expires, you’ll need to reapply for preapproval once again. This may be done at the same or a different lender.
2. When should I get preapproved for a mortgage?
Homebuyers may choose to get preapproved before they begin actively house hunting but close to the time they plan to make an offer. Getting preapproved early helps establish a clear budget and shows sellers you’re a serious homebuyer, while waiting too long may require renewing the letter if your home search extends beyond the validity period.
3. Is it worth getting preapproved for a mortgage?
Mortgage preapproval helps indicate that you are a serious buyer to a seller. It helps provide proof of your ability to finance your purchase and shows that you’ve gone through the motions of beginning to obtain financing for your home purchase.
4. Can I be denied a mortgage after being preapproved?
While mortgage preapproval may help indicate what type of mortgage you may be approved for, it does not 100% guarantee final approval. There are many factors that may impact what ultimately happens with your mortgage. For example, if the borrower waits too long their preapproval letter may expire, or if the borrower’s finances change or do not ultimately match what was provided to obtain the preapproval letter, the borrower may be denied.
5. Does getting preapproved for a mortgage affect my credit score?
Some mortgage preapprovals may result in a hard credit inquiry and affect your credit score. However, the mortgage preapproval’s impact alone shouldn’t be anything that fundamentally changes the status of your credit.
