Mortgage Pre-Approval Guide

The Complete Guide to Mortgage Pre-Approval

Getting pre-approved for a mortgage is the essential first step in any serious home purchase. It tells you exactly how much house you can afford, it signals to sellers that you are a qualified buyer, and it gives you a significant competitive advantage in multiple-offer situations. Yet many buyers confuse pre-approval with pre-qualification, skip the process entirely, or make avoidable mistakes that weaken their applications.

This guide covers everything you need to know about mortgage pre-approval: what it is, how it differs from pre-qualification, what documents you need, how the process works, and how to position yourself for the strongest possible approval.

Pre-Qualification vs. Pre-Approval: A Critical Distinction

These terms are frequently used interchangeably, but they represent very different levels of scrutiny and credibility.

Pre-Qualification

A pre-qualification is an informal estimate of how much you might be able to borrow. It is typically based on self-reported income, assets, and debt information—the lender does not verify anything. You can often get pre-qualified online in minutes without a credit check. A pre-qualification letter carries minimal weight with sellers because it represents little more than a rough calculation.

Pre-Approval

A pre-approval is a formal, verified assessment of your borrowing capacity. The lender pulls your credit report, reviews your income documentation, verifies your assets, and runs your application through their underwriting system. The result is a pre-approval letter stating the specific loan amount you are approved for, subject to finding a suitable property and a satisfactory appraisal.

In competitive markets, a pre-approval letter is essentially a requirement. Listing agents advise their sellers to prioritize offers from pre-approved buyers because the financing risk is dramatically lower. If you are making an offer without a pre-approval letter, you are at a significant disadvantage against buyers who have one.

Documents You Need for Pre-Approval

Gathering your documentation in advance streamlines the process and demonstrates to the lender that you are organized and serious. Here is the complete list:

Income Verification

• W-2 forms: The last two years of W-2s from every employer
• Pay stubs: The most recent 30 days of pay stubs showing year-to-date earnings
• Tax returns: The last two years of federal tax returns (all pages, all schedules). Self-employed borrowers will need both personal and business returns.
• 1099 forms: If you have freelance, contract, or investment income
• Other income documentation: Social Security award letters, pension statements, alimony or child support court orders, rental income documentation (lease agreements and Schedule E from tax returns)

Asset Verification

• Bank statements: The most recent 60 days (two monthly statements) for all checking, savings, and money market accounts
• Investment account statements: 60 days of statements for brokerage accounts, 401(k), IRA, and other retirement accounts
• Gift letter: If any portion of your down payment is a gift from a family member, you will need a signed gift letter stating the amount, the donor’s relationship to you, and a statement that no repayment is expected

Identification and Other Documents

• Government-issued photo ID: Driver’s license or passport
• Social Security number: For the credit check
• Rental history: Contact information for your current and previous landlords (past two years)
• Divorce decree: If applicable, including any alimony or child support obligations
• Bankruptcy discharge papers: If applicable

How Your Credit Score Affects Pre-Approval

Your credit score is the single most influential factor in your mortgage pre-approval. It determines not only whether you are approved but also the interest rate you receive, which directly impacts your monthly payment and total cost of ownership over the life of the loan.

Credit Score Tiers and Their Impact

• 760 and above (Excellent): You qualify for the best available interest rates. On a $400,000 loan, the difference between a 760+ score and a 680 score can mean $150–$200 per month in additional interest—over $50,000 over a 30-year term.
• 740–759 (Very Good): Rates are slightly above the best tier, typically 0.125–0.25% higher. Still excellent terms.
• 700–739 (Good): Solidly approvable with competitive rates. Most conventional loan programs are fully available.
• 680–699 (Fair): Approved with conventional loans, but rates are noticeably higher. Consider FHA loans, which are less rate-sensitive to credit score in this range.
• 620–679 (Below Average): Conventional loan approval is possible but with significant rate premiums. FHA loans (minimum 580 with 3.5% down) become the better option.
• Below 620: Conventional loans are generally unavailable. FHA loans require a minimum 580 for the 3.5% down payment program. Scores between 500–579 require 10% down. Below 500, most mortgage programs are inaccessible.

Which Credit Score Do Lenders Use?

Lenders pull your credit from all three bureaus (Equifax, Experian, TransUnion) and use the middle score. If your scores are 720, 735, and 740, the lender uses 735. For joint applications, the lender uses the lower of the two borrowers’ middle scores. This means that if one spouse has a 780 and the other has a 680, the loan is priced at the 680 tier. In some cases, it may be advantageous to apply with only the higher-scoring spouse if their income alone qualifies for the desired loan amount.

The Pre-Approval Process: Step by Step

Step 1: Choose Your Lender(s)

You are not limited to one lender. In fact, shopping multiple lenders is one of the smartest financial moves you can make. Rate and fee differences between lenders can save you thousands over the life of your loan. Contact at least three lenders: a national bank, a credit union, and a mortgage broker who can shop wholesale rates on your behalf.

Step 2: Complete the Application

You will fill out a Uniform Residential Loan Application (Form 1003), which captures your personal information, employment history, income, assets, liabilities, and the type of loan you are seeking. Most lenders offer online applications that take 30–45 minutes to complete.

Step 3: Provide Documentation

Upload or deliver all the documents listed above. Respond quickly to any requests for additional information—delays in document submission are the number one reason pre-approvals take longer than expected.

Step 4: Credit Check and Underwriting Review

The lender pulls your credit and runs your application through their automated underwriting system (Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector). This system evaluates your debt-to-income ratio, credit profile, assets, and employment stability to issue one of three decisions: approve/eligible, refer (needs manual review), or caution/decline.

Step 5: Receive Your Pre-Approval Letter

If approved, you receive a letter stating your approved loan amount, the loan type (conventional, FHA, VA), and any conditions. The entire process typically takes 1–3 business days, though some lenders offer same-day pre-approval.

How Long Does Pre-Approval Last?

Most pre-approval letters are valid for 60 to 90 days. After that, your financial situation may have changed—new debt, employment changes, or credit score fluctuations can alter your qualification. If your pre-approval expires before you find a home, you will need to go through the process again with updated documentation.

Pro tip: If you are close to the expiration date and actively making offers, ask your lender to refresh your pre-approval. This is usually faster than the initial process since they already have most of your documentation on file.

Multiple Pre-Approvals and Credit Impact

A common concern is that applying with multiple lenders will hurt your credit score. Here is the good news: the credit scoring models (FICO and VantageScore) recognize mortgage shopping and treat multiple mortgage inquiries within a 14–45 day window as a single inquiry. This means you can apply with five different lenders in a two-week period and it counts as one credit pull.

Take advantage of this by concentrating your lender shopping into a focused window. Get your applications submitted within the same two-week period to minimize any credit impact.

Common Mistakes to Avoid

• Changing jobs during the pre-approval or home buying process. Lenders verify employment right before closing. A job change can delay or derail your loan, especially if you switch industries or go from salaried to commission-based income.
• Making large purchases on credit. That new car or furniture set increases your debt-to-income ratio and can disqualify you. Wait until after closing to make major purchases.
• Opening new credit accounts. New credit cards, store financing, or personal loans create hard inquiries and new debt obligations. Freeze your credit behavior until closing.
• Moving large sums of money between accounts without documentation. Lenders must source all funds. Unexplained large deposits trigger additional scrutiny and documentation requirements.
• Co-signing loans for others. A co-signed loan appears on your credit report as your debt, increasing your DTI ratio.
• Depositing cash. Cash deposits are difficult to source and document. If you receive a legitimate cash gift or payment, deposit it well before starting the mortgage process and keep thorough records.

Tips for Strengthening Your Application

• Pay down revolving debt to reduce your credit utilization ratio below 30% (below 10% is ideal).
• Avoid late payments on any account for at least 12 months before applying.
• Save aggressively for a larger down payment. A higher down payment reduces your loan-to-value ratio, often resulting in better rates and eliminating PMI (at 20% or more down).
• Keep your current job stable. Two years of continuous employment in the same field is the benchmark lenders look for.
• Document everything. If you receive a bonus, commission, gift, or any unusual income, keep the paper trail clean and clear.
• Check your credit reports at AnnualCreditReport.com at least 3–6 months before applying. Dispute any errors and allow time for corrections.

Mortgage pre-approval is not just a box to check. It is a strategic tool that clarifies your budget, strengthens your offers, and accelerates the path from house hunting to homeownership. Start the process early, prepare your documentation thoroughly, and shop multiple lenders to secure the best possible terms.

Get Pre-Approved Today

A pre-approval letter shows sellers you’re a serious buyer with financing already in place. Start the process online in minutes.

After Pre-Approval

With pre-approval in hand, you’re ready to start your home search. Follow our step-by-step buying guide and use the home buying checklist to stay on track. Compare mortgage lenders to find the best rate — your pre-approval from one lender doesn’t mean you can’t shop around. First-time buyers should check our first-time buyer guide for grant and assistance programs.

Most lenders can issue a pre-approval letter within 24-48 hours. Compare offers to find the best rate for your situation.