Key Takeaways
- Pre-approval shows sellers you're a serious, qualified buyer.
- Pre-approvals clarify how much home you can afford confidently.
- Borrowers can get pre-approved online or in-person.
- Pre-approval letters boost your offer's credibility with sellers.
Article Summary
A mortgage pre-approval verifies that a buyer can purchase and finance a home.
Buying your first home is a major financial milestone, and securing a mortgage pre-approval is a key step. A pre-approval clarifies how much home you can afford and strengthens your position as a serious buyer.
This guide breaks down mortgage pre-approvals, how long they last, how they affect your credit, and the difference between pre-qualification and pre-approval. At the start, compare mortgage lenders to ensure you work with somebody fair. Whether you're starting your search or getting ready to make an offer, this guide will help you navigate the process with confidence.
What is a Mortgage Pre-Approval?
A mortgage pre-approval verifies that a buyer can purchase and finance a home.
Pre-approvals consider a buyer's credit, income, and assets; then use that information to approve a mortgage with conditions. A mortgage pre-approval lets you know exactly how much home you can afford to buy, and that you can expect to be approved for your mortgage.
A pre-approval can be completed in a few minutes online. There are just six basic verifications:
- Your name, address, and phone number
- Your credit score and history
- Your income and employment history via
- Your assets and savings
- Your citizenship and eligibility
- Your debts and remaining loan payments
Applications for VA mortgages and USDA mortgages include an additional seventh verification -- a VA benefits eligibility check for the buyer, and a USDA eligibility check for the home, respectively.
Pre-approved buyers can receive a PDF or downloadable pre-approval letter that shows sellers you’re financially qualified to buy.
Common Documents Used for Mortgage Pre-Approval
| Verification Item | Documents Used for Verification |
|---|---|
| Name, address, and phone number | Government-issued ID, utility bill, lease |
| Citizenship and eligibility | Government-issued ID |
| Credit score and history | Soft credit pull or hard credit pull |
| Debts and remaining loan payments | Credit report or account statements |
| Income and employment history | Online verification, pay stubs, W-2s, tax returns |
| Assets and savings | Online verification, bank statements, investment accounts |
Pre-Approval vs. Pre-Qualification
Many first-time homebuyers confuse pre-approvals with pre-qualifications. They're two different things.
Different from a pre-approval, a pre-qualification is a back-of-the-napkin estimate of what you can borrow from a bank. It's based entirely on self-reported information and the lender won't check whether any of it is true.
That means buyers can answer questions with the truth, with guesses, or with made-up numbers. And, since nothing is verified, the result is nothing more than an unverified estimate of home-buying power. It's why sellers and real estate agents don't accept them.
Pre-qualifications have limited use in unusual situations, such as buying a home with bad credit or with a complicated application history. But for most buyers, they’re misleading.
Pre-Approval vs Pre-Qualification
| Application Item | Pre-Approval | Pre-Qualification |
|---|---|---|
| Verification | Income, employment, credit | Self-reported info |
| Loan Amount | Verified amount | Estimate only |
| Seller Acceptance | Accepted by sellers | Rarely accepted |
| Offer Strength | Stronger offer | Weaker offer |
How To Get A Pre-Approval
Getting pre-approved for a mortgage is straightforward and can be finished fastest if you're prepared.
Here are the steps recommended to ensure you get the most fair process and the most competitive mortgage rates.
1. Calculate a mortgage payment you're comfortable making
Think about your budget and decide how much you want to spend on housing each month.
- Do you want to spend the same amount you're spending now?
- Are you comfortable adding to your monthly housing budget?
- Do you just want to know the maximum amount a lender will approve?
Your housing payment relative to your monthly income is known as your front-end ratio.
Generally, a home buyer with credit card debt and student loans should aim for a front-end ratio not to exceed 35 percent. A home buyer with no other debt can push their front-end ratio higher.
2. Create a digital folder of financial documentation
Your mortgage pre-approval will verify your household income, bank and retirement assets, and credit history. If you're not going to use a lender that retrieves your data automatically, take photographs or make PDFs and add them to a folder.
A well-built mortgage data folder will include all of the following:
- Clear front and back images of your driver's license or ID card
- W-2 statements from the last two years
- Federal tax returns from the last two years
- Pay stubs covering at least the last one month of income
- Bank statements from the last two months
If you meet the definition of first-time home buyer, include proof of on-time rental payments for the last 12 months and your landlord's contact information. Include all applicable agreements if you pay or receive child support or alimony.
3. Identify up to 5 competing mortgage companies
Mortgage companies do pre-approvals at no cost and no obligation, so take advantage -- get pre-approved.
If you don't know where, ask a friend for recommendations, talk to your real estate agent, or compare lenders here. And don't stop at the first pre-approval, either!
A famous Freddie Mac study showed that home buyers who talk to two or more mortgage companies save money on their mortgage, so make sure you get second and third opinions.
Pre-approved buyers do better. Compare lenders now.
Freddie Mac Study: How Much Buyers Save By Comparing Lenders
Freddie Mac found buyers save more when they compare lenders — here’s the breakdown at today's average rate of 6.26% .
| Lenders Compared | Projected Rate Reduction | Estimated 30-Year Savings at Lower Rate |
|---|---|---|
| 1 Lender | 0.00% | $0 |
| 2 Lenders | 0.082% | $7,560 |
| 3 Lenders | 0.121% | $11,160 |
| 4 Lenders | 0.147% | $13,680 |
| 5 Lenders | 0.166% | $15,480 |
How Pre-Approvals Affect Your Credit Score
Getting pre-approved for a mortgage may require a hard credit inquiry or a soft credit inquiry, depending on your lender. Hard inquiries lower a typical home buyer's credit score by no more than 5 points. They're full credit reports with all the available details.
Credit score hits from a hard credit pull are short-lived and unlikely to affect your qualification for a mortgage with favorable terms.
Soft inquiries don't affect your score and are just as qualifying for a pre-approval.
Ask your lender which they use.
Shop for rates without harming your score
If you're comparing mortgage rates from multiple lenders, you may worry how multiple hard inquiries may lower your score further. Fortunately, credit bureaus protect consumers.
FICO scoring models use a 45-day window, where multiple mortgage inquiries are grouped together and counted as a single inquiry. This level of protection lets home buyers shop around for their best mortgage terms without worrying about harming their score.
You can keep your credit score high after a pre-approval
Once you've been pre-approved, maintain a high credit score by not opening new credit accounts, increasing your debt, or missing monthly payments. Lenders will verify your credit before closing so keeping your finances stable ensures a smooth closing process.
A pre-approval puts you in a strong position to buy a home, and managing your credit afterward ensures you stay on track.
How Long Pre-Approvals Last
Most mortgage pre-approvals are valid for about 90 days. The 90-day window exists because pre-approvals are a snapshot in time, and credit reports get old. Mortgage programs apply expiration dates to make sure the data reflects the truth.
If your mortgage pre-approval expires, your mortgage application must be refreshed or restarted. That means authorizing a re-run of your credit history, and likely providing updated proof of your income, assets, and employment. You are not required to use the same lender, but it's good to always have a pre-approval ready.
Different mortgage loan types have different expiration dates.
Mortgage Pre-Approval Expiration by Loan Type
| Loan Type | Typical Pre-Approval Expiration |
|---|---|
| Conventional | 90 days |
| FHA | Up to 120 days, by lender |
| USDA | 90 days |
| VA | 90 days |
| Non-QM | 90-180 days, varies by lender |
Keeping Your Mortgage Pre-Approval on Track
A pre-approval shows that a lender has checked your eligibility and believes you meet their mortgage requirements, but pre-approvals are not a guarantee. Your lender will formally underwrite your application before issuing a clear-to-close.
Sometimes a pre-approved mortgage does not make it to closing for these reasons:
1. Changes in your credit score
If your credit score falls below the minimum credit score required for approval, your pre-approval could be revoked.
Current credit score minimums by loan type are:
- 620 for conventional mortgages
- 580 for FHA mortgages
- 620 for VA loans
- 640 for USDA mortgages
2. Changes in your debt-to-income ratio
If your household income drops or its debt levels climb, your application's debt-to-income (DTI) ratio may rise above mortgage approval maximums. Current maximums by mortgage program are:
- 43% for conventional mortgages
- 43% for FHA mortgages
- 41% for VA loans
- 41% for USDA mortgages
3. Changes in your employment type
If your employment type or job title changes, it could affect how lenders view your income. Even if you get a pay raise, any of the following changes could nullify your mortgage pre-approval:
- Becoming a partner in a company
- Starting a new business
- Switching from a salaried position to a salary + bonus position
- Changing industries
- Accepting payment in cryptocurrency
If you plan to make a career change while buying a home, speak with a mortgage company first.
4. Changes in your expected monthly payment
If you purchase a home with larger-than-expected real estate taxes, or a condo with higher-than-expected monthly assessments, the new projected payment could exceed your pre-approved amount. You can avoid this scenario with mortgage calculators and shopping for a home based on PITI instead of expected purchase price.
Check our home affordability calculator to see how much home you can afford.
Frequently Asked Questions About Mortgage Pre-Approvals
Get answers to common questions about mortgage pre-approvals, including how they work, how long they last, and how they affect your credit score.
Is a Mortgage Pre-Approval the Same as a Final Mortgage Approval?
No, a pre-approval is conditional based on the information you provide. Final approval happens after your lender verifies all details and you have a home under contract.
Can a Mortgage Pre-Approval Be Denied?
Pre-approvals can be revoked if your financial situation changes—such as a drop in your credit score or an increase in debt. Keep your finances stable throughout the home buying experience to avoid issues.
How Long Does It Take to Get Pre-Approved?
Most lenders can provide a pre-approval within minutes to a few hours if all necessary documentation is submitted. Traditional banks may take longer—several days to process your application.
What Happens if My Pre-Approval Expires?
If your pre-approval expires, contact your lender to refresh it. You will need to provide updated financial documents to get a new pre-approval letter.
How far in advance should I get my mortgage pre-approved?
Get pre-approved one year before buying to catch credit report errors and establish your price range. Starting early you time to fix issues and avoid overspending.
Can I get pre-approved with bad credit?
Yes. FHA loans accept credit scores as low as 580, while conventional loans require 620. A pre-approval will show you what you qualify for.
Do I need a down payment to get pre-approved?
No, you don't need the down payment money in hand to get pre-approved. The pre-approval will tell you how much down payment is required, and you can show proof of funds later in the process.
