You might have heard of needing a loan pre-qualification or a pre-approval in order to get started with the homebuying process.
While a pre-qualification simply reviews what you have provided as your income, assets, and debt, a pre-approval means that all of this information has been reviewed in-depth and the bank is confident that you have the ability to pay back the amount they stipulate. In fact, the buyers have gone through as much underwriting as possible. All that remains is for the lender is to verify that loan amount can be used for the property specified and a few odds and ends regarding the buyers.
Pre-Qualification vs Pre-Approval
Pre-qualification is merely an informal estimate of your income, assets and present debt to estimate the approximate price range you should be looking in for your new home. Pre-approval means the lender is prepared to offer you a loan of up to a certain amount based on your credit, employment, and income and has determined what loan program is the best fit for you.
Why do all that work to get Pre-Approved?
A Pre-Approval gives the seller assurance that the buyer can get the funding needed to buy the house. The seller knows the buyer has been thoroughly reviewed, is prepared to buy, and the timeline for closing may even be shortened due to the steps that were already taken.
Depending on the market, listing agents may even advise their seller to not accept an offer from a buyer that has not been pre-approved.
It also allows the buyer to know what they qualify for and to determine what they are actually comfortable with.
What is Involved in Pre-Approval?
First, select a lender or shop around with different lenders. Different lenders have different products that may be suitable for unique situations. If you need help finding a great lender, I can provide you with preferred lenders that I trust, have strong rapport with, and whom I have confidence in.
The lender is going to need the following paperwork at the very least:
• Asset and investment statements
• Bank account statements
• Credit card statements
• Pay stubs for the last two months
• Verification of other income sources
• Tax returns and W-2s for the past two years
• Form of ID
• And, of course, the mortgage application!
The lender may ask for additional documents, but this will get you started. The lender will also do a credit check, so it is a good idea to clean up any issues you can before meeting with a lender.
You can check your credit at all three credit bureaus for free each year at
The lender will then issue a letter stating the buyer is approved to purchase a home up to a specific amount and usually details the loan type(s). We will provide this information to the seller when you are ready to make an offer.