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How To Get A Mortgage Preapproval

5-Minute Read
Published on January 21, 2022

When you’re looking for a house, it helps to have an idea of what you can spend. With an intense housing market, having a clear sense of how much house you can afford can make it easier to navigate the space and identify which home buying opportunities will fit in your budget. One way to find that out is to get a mortgage preapproval.

Here’s a closer look at what preapproval is and how to best prepare to get preapproved by a lender.

What Is A Mortgage Preapproval?

With a mortgage preapproval, the lender examines your finances and credit history to determine how much house you can afford. A preapproval letter is a document from a mortgage lender telling you how much you can afford based on your credit report, income and assets.

Your preapproval is also the first step in your relationship with your lender. If you get preapproved before finding a home, you won’t have to start the whole application process once you’ve signed the purchase agreement. And many sellers and real estate agents won’t work with a buyer who’s not preapproved.

Getting Preapproved For A Mortgage: What Happens During The Preapproval Process?

At its most basic, a mortgage preapproval is a formal analysis of your financial situation. Your mortgage lender will require information on your finances and use it to calculate your preapproval.

If you’re seeking preapproval from a lender, you can expect to complete the following two steps.

1. Collection Of Financial Documents

To get preapproved, you send in proof of your income, such as W-2s and tax returns, and proof of assets, such as bank statements. Other documents may be required too. For instance, if a family member gives you money for your down payment,  you will need to provide a gift letter accounting for the funds.

Your lender then reviews these documents and uses the information to determine how big of a loan they’re willing to lend to you.

2. Credit Check

You’ll also need to have your credit pulled. Pulling your credit allows your mortgage lender to get an idea of the monthly payments you have to make on your debts. Your credit report also tells your lender how you’ve handled paying debts in the past, letting them know if you’ll be a risky borrower.

In the end, you’ll get a dollar amount that represents how much you can afford to spend on a home. That amount will be documented in your preapproval letter, which you will then be able to present to the seller of a home you’re interested in purchasing as a means of demonstrating your reliability as a home buyer.

Take the first step toward buying a house.

Get approved to see what you qualify for.

Start My Approval

Mortgage Prequalification Vs. Preapproval

It’s important to note that a preapproval is different from a prequalification. When you get prequalified, your lender doesn’t pull your credit or verify any of your information. This might cause problems if you make an offer on a house but don’t get approved for that amount.

It’s far better to know for certain how much you can afford upfront, and a preapproval can help you do that.

How To Use Your Home Loan Preapproval

Once you have your preapproval letter in hand, you can go shopping for a house with confidence knowing that you can make a rock-solid offer.

Keep in mind, however, that preapprovals do have a time limit. At a certain point, the lender has to recheck your credit report and reverify your income and assets. This time limit varies from lender to lender, but at Rocket Mortgage®, preapprovals are valid for 90 days.

If you’re already working with a lender, it’s important to make your preapproval work for you. Let’s say you want to make an offer on a house for $150,000, but you’re preapproved for $200,000. One of the things you can do is adjust the amount of your preapproval letter to be lower so it doesn’t look like you’re lowballing the seller by offering less than you can afford.

Clients can make adjustments to their preapproval letter online with Rocket Mortgage. You can do this as many times as you wish, changing the letter to any price up to the full amount of your preapproval.

Preapproval FAQs

What are the steps to getting a preapproval?

As discussed above, the biggest steps of the preapproval process are when your lender:

  • Reviews your documents on income and assets
  • Performs a credit check
  • Writes a preapproval letter stating how much you can afford

From there, your preapproval will typically be good for a few months. If you don’t purchase a home within that time, you’ll need to repeat these steps to renew your preapproval.

Why is getting preapproved for a home loan important?

Presenting a home seller with a mortgage preapproval letter shows your lender has assessed your finances and determined you can afford to purchase a home. A preapproval letter can help your offer stand out and provide the seller with more peace of mind knowing they’re selling to a buyer whose finances have been verified.

Does it hurt your credit score to get preapproved for a mortgage?

If your lender perform a hard inquiry to access your credit report through one of the three main credit bureaus – Equifax™, TransUnion® or Experian® – your credit score may temporarily lower by a few points. Rest assured, though, that this reduction won’t cause significant or long-term damage to your credit.

Can you buy a house for less than your preapproval?

Yes! While your lender may approve you for a large mortgage, you aren’t required to buy a house that’s worth that exact number. When making an offer on a property, you need account for all costs, such as your down payment, closing costs and utility bills as well as other life expenses to make sure you can afford to live in your new home.

What should I do if I can’t get preapproved?

It’s possible that your lender might deny you for preapproval or for the amount you want. Your credit score might be too low, your debt-to-income (DTI) ratio might be too high or the lender might decide your income isn’t adequate for the size of mortgage you want.

If you end up getting denied, talk to your lender about what specific steps you need to take in order to increase your chances of preapproval, and begin planning ways to improve your financial situation.

The Bottom Line

Mortgage preapproval is the first step in buying a house. Receiving a preapproval letter from your lender can give you a clearer sense of how much house you can afford, helping you navigate the housing market with confidence.

As you talk with your lender about getting preapproved, make sure you have all of the necessary documentation gathered and that you’re able to present your finances in the best light possible.

Ready to get started on your home buying journey? Start your preapproval today

Take the first step toward buying a house.

Get approved to see what you qualify for.

Start My Approval

Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.