How to Get Preapproved for a Home Loan

2. Gather the Required Financial Documentation

The mortgage preapproval process requires you to provide financial documents such as:

• Pay stubs
• Tax returns
• Bank account statements
• Investment account statements
• Financial information about other debts
• Details about any other properties you own

Your lender will also check your credit score.

3. Check Your Credit and Debt-to-Income Ratio

Two of the primary factors mortgage lenders consider during preapproval include:

• Credit score: You’ll typically need a credit score of 620 or higher, although some loans allow scores as low as 500, such as FHA loans with a 10% down payment.
• Debt-to-income ratio: You’ll want to keep your debt-to-income ratio (debt relative to income) at around 36% or less when considering all debt payments. A lower debt-to-income ratio is preferred as it means you aren’t devoting a large portion of monthly payments to debt.

4. Apply for Preapproval

You may be able to apply for preapproval via phone, online, or in person.

Your lender will do a careful review of your finances during the process. You’ll need to fill out an application and provide key financial documents like pay stubs, tax returns, and bank statements to show sources of income and continued ability to pay the loan even in cases of hardship.

If your lender is confident in your financial credentials, you’ll get a preapproval letter that can provide insight into the amount you can borrow and what your loan will cost, and that you can use when making an offer.

5. Get Your Preapproval Letter

After a thorough review of your finances, you’ll get your letter of preapproval. This will specify the amount you can borrow, the interest rate, how long your rate is locked in (guaranteed to stay the same), and your loan terms.

You don’t have to borrow the full amount you are prequalified or preapproved for, but you can choose to do so depending on your budget and home-buying goals.

Once you have your preapproval letter, you can start making offers on homes. If your offer is accepted, you'll go through the formal process of getting approved for a mortgage.

Freedom Mortgage offers customized prequalification letters tailored to you, so you don’t have to reveal to sellers the full amount you are preapproved to buy. Reach out to a loan professional at Freedom Mortgage to learn more.

Mortgage Preapproval Process FAQs

If you still want to know more about how to get mortgage preapproval, here are answers to some frequently asked questions about the process.

Why Am I Preapproved for More Than I Can Afford?

Mortgage lenders look at standard metrics like debt-to-income ratios and credit scores to decide how much you can borrow. They don’t have a full picture of the financial goals you have or ways you like to spend money. They’ll approve you for the amount they think you can borrow without a high risk of defaulting. This may be more than you believe you can afford given your lifestyle.

How Long Does Preapproval Take?

The timeline for mortgage preapproval can vary depending on the lender and depending on the complexity of your financial situation.

You'll also want to take your time during the preapproval process to make sure you find a trusted lender offering reasonable interest rates and favorable terms.

When Should I Get Preapproved for a Mortgage?

You may want to get preapproved for a mortgage early in the home-buying process, before you start looking for properties.

If you don't want to go through the full preapproval process but still want an idea of how much home you can afford or what your loan will look like, you should consider prequalification instead.

Does Preapproval Affect My Credit Scores?

Preapproval can impact your credit score, as it typically requires a hard inquiry. Meanwhile, some lenders may allow you to get prequalified without putting a hard inquiry on your record.

Even with inquiries, the impact on your score should be minimal — especially since all mortgage quotes you get in a 45-day period are typically grouped as one for the scoring formula when you’re shopping around for loans and getting multiple quotes.

Will I Get Approved for a Mortgage?

Whether you get approved for a mortgage depends on many factors, including your income, your debt levels, and the size of your loan. Your lender considers your financial details in determining if you can be approved and setting your interest rate.

Government-backed options such as FHA, VA, and USDA loans may be easier to get approved for, so be sure to talk with your lender about all the choices available to you.

How Long Does Mortgage Preapproval Last?

Mortgage preapproval typically lasts between 60 and 90 days, although the expiration date for your preapproval can vary by lender. Ask your mortgage lender how long your preapproval is good for when you get your preapproval offer. This is typically stated in your letter of preapproval or prequalification.

Final Thoughts: Mortgage Preapproval and Prequalification

Both mortgage preapproval and mortgage prequalification can make the home-buying process easier by providing insights into your loan options, so you can make sure you look at homes within your budget. You can also use it to show agents and sellers that you’re a serious buyer.

Prequalification can be both faster and easier, though, so if you’re ready to start your home-buying journey, contact Freedom Mortgage to start the prequalification process today.