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The Advantages of Getting Mortgage Pre-Approval

How to Get Pre-Approved on Your Home Loan

In order to get pre-approved, you’ll need to contact a lender. The lender will review your credit reports, your employment history, and your income — then determine which loan programs you qualify for, the maximum amount you can borrow, and the interest rates you will be offered. Obtaining pre-approval means that the lender is confident in your ability to pay off a loan.

Information to Provide for the Pre-Approval

This process is a simplified version of what you will ultimately go through to get approved for your final loan. Lenders are generally interested in your financial history for the last two years: two years of pay stubs, taxes, and residency. Information on your current assets and bank statements from any savings or investments are required as well. Also, a valid photo ID (driver’s license, passport,) and social security number for a credit check.

What to Do With Your Pre-Approval

In many cases, the lender that gives you your pre-approval is the one that approves the final loan, but not always. Some borrowers, learning more about the process, decide to go with another lender. You should feel free, before the loan is locked in, to consider competing offers.

The pre-approval gives the home buyer an idea of what their monthly payments, down payments, and terms will look like. The pre-approval is not just what you think you can afford, but what you can actually afford.  A pre-approval letter is a great way to show agents and sellers that you have the resources and are serious about buying a home.

Read: What Are Different Types of Home Loan Mortgages?

Read: What Are Some Downpayment Options?

How to Get Pre-Approved by a Lender

It’s all in the paperwork & preparation

Obtaining a mortgage requires an extensive accounting of your personal and financial life. The mortgage application can appear daunting, but a little organization in your files and paperwork can go a long way. Go over this list of information and documentation required to apply for a loan, and get a jump on your application.

Information for the Federally Required Mortgage Application

  • Full Name, Birth Date, Social Security #, Phone Number
  • Number of children, their ages, marital status
  • Residence history for the last two years; for renters, this includes the landlord’s name and monthly rent. For homeowners, all mortgage, tax and insurance info for all properties owned.
  • Two years of employment history: companies, addresses, titles held, contact
  • Two years of income: includes bonuses, commissions, and self-employment
  • Account Balances for all banking: checking, savings, retirement, investments
  • Current fixed debt: credit cards, mortgage, car payments, alimony, child support, student debt
  • Documentation of bankruptcy (in the last seven years), lawsuits, or a co-signer on any property
  • If a percent of the down payment will be borrowed

Documentation Required to Obtain the Loan

  • Written authorization for the lender to run a credit report
  • Written explanations for anything derogatory in the credit report
  • Discharge papers from Bankruptcy (if in the last seven years)
  • For renters, 12 months of canceled rent checks from the landlord, or a form confirming on-time rent payments
  • If renting to others, applicable lease agreements and bank statements
  • If selling while buying, confirmation of the listing agreement
  • 30 days of pay stubs
  • Two years of W2 forms
  • Two years of personal federal tax returns
  • For the self-employed, two years of business tax returns
  • For the self-employed, year-to-date profit and loss statement
  • Documentation of child support and alimony payments, and divorce decree
  • Two months of bank statements from checking, saving, retirement, and investment accounts
  • If you are receiving gift funds, a statement from the giver confirming the gift is a gift and not a loan

How Your Credit Score Could Affect Your Ability to Obtain a Loan

If you know your credit score, this general breakdown will give you an idea of what you may be working with.

720+ Excellent Credit: Should easily qualify for a variety of mortgages, obtain good interest rates and low fees.

680 – 719 Good Credit: Most likely able to qualify, with a decent interest rate and standard fees.

620 – 679 Fair Credit: A chance to qualify, with fewer options, higher interest rates and fees.

580 – 619 Poor Credit: Difficult to qualify, with much fewer options, higher interest rates and fees.

350 – 579 Bad Credit: Unlikely to qualify for a mortgage, with some exceptions.

Mortgage Blog Articles

Mortgage Pre-Approval

Mortgage Pre-qualifications vs. Pre-approval

7 Items to Check for In a Pre-Approval Letter

How to Find a Lender

Using the Homes.com professional search functionality, you can find lenders across the US. Information for local mortgage professionals can also be found on each of our property detail pages, as well as through the recommendations of your real estate agent or brokerage. Are you a veteran? Get fast, pre-approval with the nation’s leading VA lender.

Are There Any Homes That Don’t Require A Mortgage?

Not all home purchases require a mortgage, but for most buyers, a mortgage is the easiest and most logical option for affording a home.

Read: How Do I Buy a “Cash Only” Property?

Read: What Does “Owner/Seller Will Carry” Mean?

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