Seven Steps to Your First Pre-Approval

A pre-approval is a lender's written statement of how much you can borrow, based on documents they have actually reviewed and a credit report they have actually pulled. It is not the same as a pre-qualification, which is an estimate based on what you told someone. In a competitive market, sellers know the difference, and so do their agents.

Here is what the process involves, and what to avoid once it starts.

Step 1: Understand what you are getting

A pre-qualification is a conversation. You state your income, debts, and assets; the lender estimates what that supports. Fast, free, and worth roughly what it costs.

A pre-approval means the lender has pulled your credit, reviewed your documents, and run the file through automated underwriting. It comes with a letter you can attach to an offer.

If you are still browsing, a pre-qualification is fine. Once you are prepared to write an offer, you need the real one. Ask directly which you are being given — the terms get used loosely, and finding out at offer time is the wrong moment.

Step 2: Look at your own credit first

Pull your reports before a lender does. You are entitled to free copies from each of the three bureaus at annualcreditreport.com.

You are looking for errors, not for a score: accounts that are not yours, balances already paid, collections you have settled, duplicate entries. These are common, and disputing them takes weeks — which is time you have now and will not have once you are under contract.

If something looks bad but explainable, do not hide it. Bring it up early. Underwriters deal with imperfect histories constantly; what they cannot deal with is a surprise in week three.

Step 3: Gather the documents

Nearly every file needs the same core set:

• Income — most recent 30 days of pay stubs, W-2s for two years. Self-employed: two years of complete personal and business tax returns, plus a year-to-date profit and loss.
• Assets — two months of statements for every account you will use for down payment and reserves. All pages, including the blank ones.
• Identification — driver's license and Social Security number.
• History — two years of addresses and employment, with no unexplained gaps.

Two things that cause more delay than anything else on this list:

Every page of every statement. Lenders need the full document, including pages that say "intentionally left blank." Partial statements come back as conditions and cost days.

Large deposits need a paper trail. Any deposit outside your normal pattern must be sourced and documented. A gift from a relative requires a signed gift letter and often proof of the donor's ability. Cash you have been holding is the hardest money to use, because it cannot be traced.

Step 4: Know what they are actually measuring

Three things, in roughly this order:

Capacity. Your debt-to-income ratio — monthly obligations against gross monthly income. The new mortgage payment counts, including taxes, insurance, and any HOA dues.

Credit. Score and history. Recent late payments carry more weight than old ones. Consistency matters more than perfection.

Capital. Your down payment plus reserves — what is left after closing. Reserves matter more than most first-time buyers expect and are a common reason for a smaller approval than anticipated.

For VA loans there is a fourth test, residual income — actual dollars left over each month — which can approve a borrower whose ratios alone would not.

Step 5: Shop within the window

Applying with more than one lender does not wreck your credit, as long as you compress it.

Credit scoring models treat multiple mortgage inquiries within a short window as a single event, precisely so that consumers can shop. Depending on the model, that window runs from about 14 to about 45 days. Practically: do your comparing inside two weeks and it counts once.

There is a related advantage in working with a broker. We submit to multiple wholesale lenders on one credit pull, so you get several lenders' answers without several applications.

Step 6: Get the letter, and read it

A useful pre-approval letter names a specific amount and states what it is conditioned on. Most are conditioned on things not yet verified — the property, the appraisal, final underwriting.

Two practical notes:

Ask for a letter at your offer amount, not your maximum. Handing a seller a letter for $650,000 when you are offering $580,000 tells them exactly how much more you can pay.

They expire. Most run 60 to 90 days, because credit reports and pay stubs go stale. If your search runs long, refresh it rather than submitting an expired letter.

Step 7: Change nothing until you close

This is where deals die, and every item on this list has killed one:

• Do not open new credit. Not a card, not a car, not store financing for the furniture. New debt changes your ratios and lenders re-check before closing.
• Do not close old accounts. It can lower your score by shortening your history and shifting utilization.
• Do not change jobs if you can avoid it — especially not from salaried to self-employed, which can require two years of history in the new structure.
• Do not move money around between accounts without documenting it. Transfers create deposits that have to be sourced all over again.
• Do not make large purchases. The appliances can wait three weeks.

Your file gets re-verified shortly before closing. Anything that changed will show up.

Start the conversation

Pre-approval usually takes a few days once documents are in hand, and there is no cost to finding out where you stand.

We are licensed in California, Arizona, Texas, Oklahoma, Alabama, Florida, and South Carolina. Tell us roughly what you are looking at and we will tell you what it takes.

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FAQ

What is the difference between pre-qualified and pre-approved? Pre-qualification is an estimate based on information you provide. Pre-approval means the lender pulled your credit, reviewed your documents, and ran automated underwriting. Sellers take pre-approvals seriously and largely disregard pre-qualifications.

Does getting pre-approved hurt my credit? Minimally, and shopping is protected. Scoring models count multiple mortgage inquiries within roughly 14 to 45 days as a single inquiry. Compare inside two weeks and it counts once.

How long does a pre-approval last? Typically 60 to 90 days, because the underlying documents go stale. It can be refreshed.

What documents do I need? Pay stubs for 30 days, W-2s for two years, two months of complete bank statements for every account being used, identification, and two years of address and employment history. Self-employed borrowers need two years of full tax returns and a year-to-date profit and loss.

Can I get pre-approved with student loan debt? Yes. Student loans count toward your debt-to-income ratio, and how the payment is calculated varies by program — which sometimes means one loan type works where another does not.