How to get pre-approved for a mortgage

The exact pre-approval process varies by mortgage lender. But it generally involves a loan application, credit check, and various forms of documentation. Many lenders let you do the whole thing online. But if you want, you could also get pre-approved over the phone or in person.

Step 1: Complete a home loan application

Your lender will usually give you the option of completing your loan application online, over the phone or in person. Online applications typically take 10-20 minutes to complete.

The loan application, also known as Form 1003, asks for your personal information, financial information and loan information.

After your application is completed, the lender will pull a three-bureau credit report known as a tri-merge. This report shows your credit scores and your credit history.

Note: You can apply and get pre-approved with any lender you wish. You can even get pre-approved by more than one lender to find the best offer. Pre-approvals are non-binding, and you’re free to switch before taking out the loan.

Step 2: Document your income and assets

Your lender will require documentation to support the information on your loan application. (This is what makes pre-approval different from pre-qualification.)

Typically, your lender will require these documents for pre-approval:

• Last two year’s W-2s and/or 1099s
• Last two year’s tax returns
• Profit & Loss statement if self-employed
• Paycheck stubs for last 30 days, if applicable
• Bank accounts, retirement accounts and other asset accounts
• Divorce decree, separation agreement, if applicable
• Contact information for your landlord(s) for last two years, if applicable

To speed up the pre-approval process, it helps to have these documents on hand before you get started. Some lenders are able to pull documents directly from your employer and bank, but not all.

Step 3 – Your mortgage lender completes the pre-approval

Once you’ve filled out your pre-approval application, turned in your documents, and paid your application fee (if applicable), your work is done. The last step (underwriting) is up to your lender.

Most lenders use a universal automated underwriting system (AUS) to pre-approve customers for home loans. AUS is a technology-driven underwriting process that provides a computer-generated loan decision.

In other words: You don’t have to wait for a human to read through all those documents and approve you.

By using automated underwriting, lenders have the capability to provide near-instant results that can generally take up to 60 days to complete via manual processing.

Pre-approval versus pre-qualification

It’s easy to confuse mortgage pre-approval and pre-qualification (especially because lenders often make up their own names for these steps). But you shouldn’t mix the two up. A pre-approval letter gives you verified home buying power — whereas a pre-qualification letter is just an estimate of what you can afford.

Mortgage pre-qualification

Getting pre-qualified involves an informal interview with a mortgage lender. Your lender typically asks you about your credit, income, assets, and debts. Then it gives you a general idea of the price range you can afford, and how much cash you’ll need to purchase a home.

Pre-qualification is incredibly helpful in figuring out what you can afford. But since none of your financial information has been verified yet (only stated), a pre-qualification letter won’t be taken seriously by a home seller.

To actually make an offer, you need a pre-approval letter.

Mortgage pre-approval

Getting pre-approved is a more extensive look into your credit report, your employment history, and your income. Pre-approval requires all the same information as pre-qualification, but the lender goes one step further by actually verifying the information you provided.

To get a pre-approval letter, you’ll complete a full loan application. That includes submitting documents like W2s, bank statements, and a credit check, to support the information you provided verbally.

With a pre-approval letter in hand, you’re free to make an offer on a house within your price range. The seller now has proof that you’re good for the amount stated.

Mortgage pre-approval FAQ

Can you get denied after being pre-approved for a mortgage?

Yes, you can get denied for a mortgage loan even after being pre-approved for it. There are a number of reasons this could happen.

For example, if something hits your credit report and lowers your scores, it could push you outside of the lender’s qualification guidelines.

Or if you lose your job prior to closing on the loan, you’ll likely be denied. That’s because the lender can no longer verify you’ll be able to make your payments.

And common mistakes could affect your pre-approval, too — like running up too much debt before the loan closes.

Basically, anything that significantly impacts your financial picture could impact your mortgage pre-approval.

Also, a pre-approval typically happens prior to finding a home. As such, your home must also be approved by the lender.

Common pre-approval mistakes

Any changes to your mortgage application after getting pre-approved could affect your interest rate or home buying budget.

The best thing you can do between the time you get pre-approved and your closing date is to maintain status quo — keep everything the same from a financial standpoint.

• Keep the same job
• Delay major purchases that could impact your credit or debt ratios
• Protect your savings account
• Gather documentation for any large deposits into your bank accounts

If you do have any major changes in any of these areas, be sure to contact your lender as soon as possible.

Otherwise, by holding steady, you should be able to keep your mortgage pre-approval intact and your home offer secure.