A mortgage pre-approval is your golden ticket to house hunting with confidence. It tells you how much a lender is willing to loan you, locks in an interest rate, and shows sellers you’re a serious buyer. Here’s what you need to know before you apply:
What Is a Mortgage Pre-Approval?
- Preliminary Assessment: A lender reviews your income, debts, assets, and credit score to estimate how much you can borrow.
- Rate Hold: Most lenders will lock in an interest rate for 60–130 days, protecting you from increases while you shop.
- Not a Guarantee: It’s not final approval—your finances and the property will be reassessed before closing.
What You’ll Need to Apply
- Proof of Income: Recent pay stubs, employment letters, or tax returns if self-employed.
- Credit History: A credit check is required, and your score affects your eligibility and rate.
- Assets & Debts: Bank statements, investment accounts, and details on loans or credit cards.
- Down Payment Info: Proof you can cover the minimum down payment and closing costs.
Benefits of Getting Pre-Approved
- Know Your Budget: Helps you shop within your means and avoid financial overreach.
- Stronger Offers: Sellers take you more seriously when you’re pre-approved.
- Rate Protection: Locks in a rate even if market rates rise.
Common Mistakes to Avoid
- Major Purchases: Don’t buy a car or rack up debt before final approval—it could void your pre-approval.
- Job Changes: Switching jobs or becoming self-employed can raise red flags.
- Overestimating Budget: Just because you’re approved for a certain amount doesn’t mean you should spend it all.
Smart Tips
- Shop Around: Compare lenders and mortgage brokers for the best rates and terms.
- Read the Fine Print: Understand the terms, rate hold period, and conditions of your pre-approval.
- Stay Financially Stable: Keep your credit score and income consistent until closing.
