A mortgage preapproval is an indicator that you are qualified for a home loan for a specific amount. This is very important for first-time home buyers if you do not have the full amount of cash needed to buy the house you want.
Since most of us rely on our jobs to get the house we want to live in, we seek this option to pay for the house in monthly payments for years, but before we could do that, mortgage lenders need to make sure you are able to pay for a specified amount of time.
Pre-Qualification is a rough estimate. You tell a lender about your income and debts, but they don’t check any documents. It’s quick and easy but not very strong when making offers.
Pre-Approval is more official. You provide documents, and the lender checks your credit. Sellers take pre-approval seriously because it shows you’re likely to get a loan.
Pre-approval helps you understand what price range you can afford. This means you won’t waste time looking at homes outside your budget.
In a competitive housing market, sellers want buyers who are ready to go. A pre-approval letter tells them you’ve already been checked by a lender.
Since your financial information has already been reviewed, the loan process can move faster once you find a home.
If there’s an issue with your credit or income, pre-approval will uncover it. That gives you time to fix things before making offers.
Getting pre-approved requires some paperwork. Here’s what you’ll likely need:
Lenders use something called your Debt-to-Income Ratio (DTI) to see if you can afford a mortgage. It compares how much money you owe each month to how much money you earn.
Example: If you pay $1,000 in debts and earn $4,000 a month: $1,000 ÷ $4,000 = 0.25, or 25%
Most lenders prefer your DTI to be below 43%. The lower, the better.
Your job history matters when applying for a mortgage. Lenders want to see:
If you recently switched jobs but stayed in the same field, you’re probably fine, especially when you have increases in your income. If you started a new career or became self-employed, the lender may want more documents to feel confident about your income.
Not all lenders are the same, and finding the right one can make a big difference. Here’s what to look for:
Want help finding a lender you can trust? Visit SellBoji.com for real estate resources and tools to guide your journey.
A mortgage broker is a licensed professional who helps you find the best loan by comparing different lenders. Think of them as a middle person between you and the banks. Instead of going to one lender, a broker looks at multiple lenders to find you the best deal.
Most brokers are paid by the lender after the loan closes. Others may charge a small fee upfront or include it in the loan amount. Always ask how your broker is paid before you agree to work with one.
It depends. If you like comparing and negotiating yourself, you might go directly to lenders. If you’d rather have someone guide you and do the work, a broker could be a great choice.
Pro Tip: Whether you choose a broker or a lender, make sure they explain everything clearly and don’t rush you into a decision.
Once you’re pre-approved, you’ll receive a letter stating how much you can borrow. This letter is usually good for 60 to 90 days. During this time, you can shop for a home confidently.
Once you find the right home and your offer is accepted, your lender will:
If everything goes well, you’ll be ready to close on your home!
After you’re pre-approved and have a great real estate agent, it’s time to start looking at homes! This part is fun, but it also takes patience and planning.
Before you visit homes, write down what matters most to you. Ask yourself:
Knowing your must-haves helps you and your agent focus on homes that really fit your lifestyle.
Even if you’re approved for a higher amount, try to stay within your comfortable budget. Remember, you’ll have other costs like maintenance, utilities, and property taxes.
Good homes can sell fast, especially in busy markets. If you find a home that fits your needs and budget, talk with your agent right away. They’ll help you decide on an offer and handle the paperwork.
Once your offer is accepted, schedule a home inspection. This helps you find any problems with the house before finalizing the purchase. It’s a smart way to protect yourself and your investment.
A great real estate agent makes the home-buying process smoother. They help you find the right neighborhood, set up showings, make offers, and handle all the steps until you get the keys.
Bonus Tip: Some agents specialize in working with first-time buyers. They can explain every step and help you feel more confident.
Even after you’re pre-approved, certain actions can affect your final loan:
Avoid big financial changes until your home loan is final.
Q1: How long does mortgage pre-approval last?
Pre-approval usually lasts 60 to 90 days, but some lenders may offer extensions.
Q2: Does pre-approval guarantee I’ll get the loan?
Not 100%. Final approval also depends on the home appraisal and any updates to your finances.
Q3: Can I get pre-approved with more than one lender?
Yes! It’s smart to shop around. Just do it within a short time (like 14 days) to avoid hurting your credit score.
Q4: Can I use online lenders?
Absolutely. Many online lenders are fast and easy to work with—just be sure to check reviews and compare rates.
Q5: What if I don’t get pre-approved?
Ask your lender why. It might be your credit score, debt levels, or income. Once you know, you can work on improving those areas and try again later.