What’s a Mortgage Preapproval and How to Get One

After finding your agent, the first step to buying a house is getting a mortgage preapproval. While it’s tempting to look on home listing sites first, getting a preapproval makes the entire home buying process so much easier. That way if you see a home that you like, you won’t miss your chance to put in an offer on it. 

So what is a mortgage preapproval?

A preapproval determines how much you can borrow from a lender to buy a home. Many people think this is an estimate, but it’s actually an offer. The financial institution is willing to offer you a loan of up to this amount. It’s important to note that this is not a guarantee but an offer. It might not make sense for your finances to spend that entire preapproval amount on a home because this is the maximum number that they are willing to lend you. This amount will help you and your agent narrow down a price that’s right for you. Having this budget will make it easier to shop, you don’t want to waste time looking at houses outside your budget.

Once preapproved, you will typically receive a preapproval letter. Make sure this is something that you share with your agent. Mortgage preapprovals are typically good for 60 to 90 days, depending on your lender. The reason why lenders put an expiration date on your preapproval it’s because your credit and finances could change in that time so if they do the best they can to protect themselves. 

What’s the difference between a preapproval and an approval? 

Once you find the right home you’ll need a full approval. The lender will the appraisal value of the home, title information on the home, and more information about the home’s condition before they move forward granting a full approval of the loan. A preapproval does not guarantee your approval. They are conditional so try to disclose all accurate information and don’t take out additional lines of credit in the mean time. 

How do I get a mortgage preapproval? 

1. Research your credit score and credit history. 
   • This is not a requirement, but we highly recommend doing this step. It’s important that you are fully prepared. Checking your score and history gives you that knowledge. Check out this helpful article about how to access your credit information safely. 
   • Checking your credit history gives you time to dispute anything that might be inaccurate. If you find errors, they could be hurting your overall score. Find more information about how to safely dispute inaccurate information here. 
2. Gather relevant financial documents. 
   • The better prepared you are before applying, the shorter the process will be. Check out our full list of documents needed for a preapproval here.
3. Research lenders.
   • If you want to ensure that you’re getting the best rate, we recommend reaching out to at least three vendors. Please note that each lender will pull your credit potentially resulting in a small dip in your score. FICO recommends that you keep your inquiries confined to a 30 day period. Need some recommendations? Give us a call. 
4. Fill out their application. 
   • Each lender’s process will be a little bit different but they will let you know what information they need from you.