How to Get a Mortgage Pre-Approval

Mortgage Preapproval vs Prequalification

There is a big difference between mortgage preapproval and prequalification.  A lender can prequalify you after a quick conversation, but sellers won’t take your offer very seriously.  Whereas a preapproval will tell sellers that your lender has done their due diligence in assessing your ability to qualify for a loan.  In today’s competitive market, you need to submit a preapproval with desktop underwriting.

It is important to note that having a preapproval does not obligate you to a particular lender.  You should shop around for the best rate and terms.  You can apply for a mortgage pre-approval through many different types of lenders.  Mortgage brokers tend to be a good choice because they are intermediaries between you and the lender and will help you shop for multiple financial institutions to get the best rate and terms.  Mortgage brokers are typically paid by the lender after the loan closes; sometimes the borrower pays the broker’s commission upfront at closing. ASK!

Once your loan officer or mortgage broker runs your credit, verifies your income, assesses your debt-to-income ratio, and reviews the funds you have available for a down payment, they can give you a better idea of which home loan products you qualify for.  FHA financing is easier to qualify for than conventional home loans, but they are more expensive in the long run because of private mortgage insurance.  You should also ask for a comparison of fixed-rate and adjustable-rate mortgage options.

Documents Needed for a Mortgage Pre-Approval

• Driver’s license or passport
• Social Security card or permanent resident card
• Credit history- the lender will pull this for you
• Employment verification
• Pay stubs for the past 30 days
• Federal income tax returns
• W-2s for the past two years
• Proof additional income
• Bank statements
• Proof of funds for your down payment and closing costs in the form of bank statements, statements from stock accounts and mutual funds, a grant approval certificate and/or a gift letter.