How to Get Preapproved for a Mortgage: Free Checklist + PDF Guide

What Does Mortgage Preapproval Mean?

Mortgage preapproval means a lender has reviewed financial information about you and made a preliminary determination about the mortgage financing for which you may qualify.

Depending on the lender, the review may include your:

• Credit history

• Credit score

• Employment

• Income

• Monthly debt obligations

• Bank accounts

• Investment accounts

• Available down payment

• Financial reserves

• Loan program eligibility

The lender may then issue a preapproval letter stating a proposed loan amount or purchase-price range.

However, your preapproval is conditional.

Your lender can still require additional documentation, and your eventual mortgage approval may depend on the property appraisal, title review, homeowners insurance, final underwriting, updated credit information, and other conditions.

That is why you should never treat your preapproval letter as a guaranteed mortgage commitment.

Mortgage Preapproval vs. Prequalification

You may hear the words “prequalification” and “preapproval” used when you begin shopping for a mortgage.

The exact meaning can vary by lender.

Generally, prequalification is an early estimate based on financial information you provide. Preapproval usually involves a more detailed review of your finances and may require supporting documents and a credit check.

If you are only trying to estimate your home-buying budget, prequalification may be enough to get started.

If you are preparing to make offers on homes, you may want a more complete preapproval.

You can compare the early qualification process in [Best Way to Get Prequalified for a Home Loan] before deciding which step you need.

Step 1: Check Your Credit Before Applying for Mortgage Preapproval

Your credit can affect your mortgage options, interest rate, loan terms, and ability to receive preapproval.

Before you submit applications, review your credit reports for problems such as:

• Accounts that do not belong to you

• Incorrect late payments

• Incorrect balances

• Duplicate accounts

• Collections you do not recognize

• Incorrect personal information

• Old information that should have been removed

You should also review your existing credit card balances and monthly payments.

Paying down debt may improve your financial profile, but you should not automatically close old credit accounts or make major credit changes without considering how those changes could affect your credit.

You also should avoid taking on unnecessary new debt shortly before applying for a mortgage.

Step 2: Decide What Monthly Mortgage Payment You Can Afford

Your maximum preapproval amount and your comfortable home-buying budget are not necessarily the same thing.

A lender may determine that you qualify for a certain mortgage amount, but you still need to decide whether the resulting payment fits your personal budget.

When estimating affordability, include more than principal and interest.

Your total housing expenses could include:

• Mortgage principal

• Mortgage interest

• Property taxes

• Homeowners insurance

• Mortgage insurance

• Homeowners association fees

• Flood insurance when required

• Maintenance

• Repairs

• Utilities

You should also consider whether you will still have enough money available for emergency savings, retirement contributions, transportation, food, health expenses, travel, and other financial goals.

You do not have to purchase the most expensive home your lender is willing to finance.

Step 3: Calculate Your Debt-to-Income Ratio

Your debt-to-income ratio, commonly called DTI, compares certain monthly debt obligations with your gross monthly income.

Mortgage lenders use DTI as part of their evaluation of your ability to repay a loan.

Your debts may include payments for:

• Credit cards

• Car loans

• Student loans

• Personal loans

• Existing mortgages

• Court-ordered obligations when applicable

• Other recurring debts considered under the lender’s underwriting requirements

Your acceptable DTI depends on the mortgage program, lender, borrower profile, and other underwriting factors.

Instead of assuming that one DTI percentage applies to every borrower, ask each lender how your debts will be calculated for the specific mortgage program you are considering.

Step 4: Gather Your Mortgage Preapproval Documents

Having your documents organized before you apply can make the mortgage preapproval process easier.

Your lender may request documents that verify your identity, employment, income, assets, and debts.

Income Documents

Depending on how you earn your income, you may need:

• Recent pay stubs

• W-2 forms

• Tax returns

• 1099 forms

• Documentation of bonuses or commissions

• Documentation of other qualifying income

• Business financial records if you are self-employed

Do not assume that every borrower needs exactly the same paperwork.

Ask your lender for a personalized document checklist.

Asset Documents

Your lender may also request statements from:

• Checking accounts

• Savings accounts

• Money market accounts

• Brokerage accounts

• Retirement accounts

• Other accounts being used for your home purchase

If you need copies of banking records, use [Bank Statement Request Letter: Free Sample] to request the correct statement period from your bank.

Identification Documents

You may be asked to provide appropriate identification and other information necessary for the lender to verify your mortgage application.

Use your lender’s secure portal whenever possible for sensitive documents instead of sending Social Security numbers, complete account numbers, tax records, or identification through unsecured email.

Step 5: Prepare to Explain Unusual Financial Activity

Your mortgage application may contain something that requires additional explanation.

For example, an underwriter may ask about:

• A large bank deposit

• A recent job change

• An employment gap

• A late payment

• A collection account

• A previous address

• Declining income

• A new credit account

• A transfer between bank accounts

• A recently paid debt

If your lender asks for an explanation, answer the specific question truthfully and provide supporting documentation when available.

Do not provide a long emotional explanation when a short factual response will answer the lender’s question.

You can use [Letter of Explanation: How to Write One + Free Templates] if your lender requests a written explanation.

Step 6: Document Your Down Payment

Before you apply, determine approximately how much money you expect to use toward your purchase.

Your funds could include money for:

• Down payment

• Earnest money

• Closing costs

• Prepaid expenses

• Moving expenses

• Required reserves

Your lender may need to verify where certain funds came from.

For example, if part of your down payment is a legitimate gift from an eligible donor, your lender may request documentation confirming that the money is a gift rather than an undisclosed loan.

For sample wording, see [25 Family Gift Letter Samples], which includes a home down-payment gift letter.

Always follow your lender’s specific requirements for gift funds, transfers, deposits, and documentation.

Step 7: Avoid Unexplained Cash Deposits

If you are preparing for mortgage underwriting, be careful about moving money around without keeping records.

Your lender may need to document the source of money appearing in accounts being reviewed for the mortgage.

Keep records when money comes from sources such as:

• Selling a vehicle

• Selling another asset

• Transferring money between your own accounts

• Receiving an eligible financial gift

• Receiving an insurance payment

• Receiving reimbursement

• Selling property

If you transfer money between accounts, keep records showing both sides of the transaction.

You want your financial activity to be easy for an underwriter to follow.

Step 8: Compare More Than One Mortgage Lender

You do not have to use the first lender who offers you preapproval.

Consider comparing mortgage companies, banks, credit unions, mortgage brokers, and other qualified lenders available to you.

Compare important factors such as:

• Interest rate

• Annual percentage rate

• Loan type

• Loan term

• Origination charges

• Discount points

• Mortgage insurance

• Estimated closing costs

• Down-payment requirements

• Rate-lock options

• Customer service

• Processing requirements

You should also ask what type of preapproval review each lender performs.

A letter based primarily on unverified information may not provide the same level of certainty as a preapproval involving detailed document review.

Step 9: Complete the Mortgage Preapproval Application

Once you select a lender, you will usually complete an application containing information about your:

• Identity

• Employment

• Income

• Assets

• Liabilities

• Current housing expenses

• Intended property purchase

• Requested financing

Complete the application accurately.

Do not exaggerate your income, hide debts, or guess when you do not know an answer.

If something needs clarification, ask your loan officer.

If you later need to communicate formally with your lender about financing, [17 Best Home Loan Request Letter Samples] gives you several mortgage-related request examples.

Step 10: Be Prepared for a Credit Check

A mortgage lender will generally need to review your credit as part of a meaningful preapproval process.

Before authorizing the credit review, you can ask:

• What type of credit inquiry will be performed?

• Which credit reporting agencies will be reviewed?

• When will the inquiry occur?

• Could another credit report be required later?

• How long will this preapproval remain current?

When comparing lenders, try to complete your mortgage shopping within a reasonably concentrated period rather than repeatedly applying over many months.

You can also ask the lender how mortgage-shopping inquiries may affect the credit scoring model being used for your application.

Step 11: Respond Quickly to Your Loan Officer

Submitting your initial application may not complete the preapproval process.

Your loan officer or mortgage processor could request additional information.

For example, you may need to provide:

• A newer pay stub

• Another bank statement

• Employment verification

• Additional tax records

• Proof of a deposit

• Proof that a debt was paid

• Documentation of gift funds

• A letter of explanation

Respond as quickly and accurately as you reasonably can.

Incomplete documentation can slow down the lender’s review.

If the lender needs formal banking verification in addition to account statements, review [Bank Letter for Mortgage Application: 5 Templates] for examples of information a bank letter may contain.

Step 12: Review Your Mortgage Preapproval Letter

If your application satisfies the lender’s preliminary requirements, you may receive a mortgage preapproval letter.

Read it carefully.

Look for information concerning:

• Maximum loan amount

• Loan program

• Down-payment assumptions

• Preapproval expiration or review date

• Conditions

• Property restrictions

• Required documentation

• Lender contact information

Ask your loan officer about anything you do not understand.

You should also confirm whether your lender can issue a revised preapproval letter for a lower amount when you make an offer.

For example, if you are preapproved for $450,000 but are offering $385,000, you may not necessarily want to provide a seller with a letter showing your maximum borrowing capacity. Discuss that strategy with your lender and real estate professional.

How Long Does Mortgage Preapproval Take?

Your mortgage preapproval timeline depends on the lender, the complexity of your finances, and whether your documentation is complete.

A simple application with straightforward salaried employment and organized documentation may move faster than an application involving:

• Self-employment

• Multiple businesses

• Rental properties

• Commission income

• Significant investment income

• Recent job changes

• Large deposits

• Credit problems

• Multiple sources of down-payment funds

You can help prevent unnecessary delays by gathering your documents before applying and answering lender requests promptly.

How Long Is a Mortgage Preapproval Good For?

Your preapproval does not remain current indefinitely.

The lender may require updated information after a certain period because your income, debts, assets, credit, interest rates, or other circumstances can change.

Your lender might request updated:

• Pay stubs

• Bank statements

• Employment information

• Credit information

• Asset statements

Check the date and conditions shown on your preapproval letter rather than assuming every mortgage preapproval lasts the same amount of time.

Can You Get Preapproved for a Mortgage Online?

Yes. Many lenders allow you to begin or complete the mortgage preapproval process online.

You may be able to:

• Create an account

• Complete your application

• Authorize a credit review

• Upload financial documents

• Communicate with your loan officer

• Track outstanding conditions

• Receive your preapproval letter electronically

Convenience should not be your only consideration.

You should still compare loan costs, mortgage programs, lender reputation, communication, and service.

How to Get Preapproved for a Mortgage When You Are Self-Employed

You can get preapproved when you are self-employed, but your documentation may be more extensive.

Your lender may need information about your business and income history.

Depending on your circumstances and loan program, you may be asked for documents such as:

• Personal tax returns

• Business tax returns

• Profit-and-loss statements

• Business bank statements

• Documentation of business ownership

• Other records required to calculate qualifying income

Do not assume your gross business revenue is the same as the income the mortgage lender will use for qualification.

Ask the lender how your qualifying income will be calculated before you determine your home-buying budget.

How to Improve Your Chances of Mortgage Preapproval

You cannot guarantee mortgage preapproval, but you can make your application easier to evaluate.

Before applying, consider whether you can:

1. Correct legitimate credit-report errors.

2. Reduce unnecessary credit card balances.

3. Avoid taking on new debt.

4. Build your savings.

5. Organize your income documents.

6. Document your down-payment funds.

7. Keep records of unusual deposits.

8. Avoid unnecessary job or financial changes.

9. Pay your bills on time.

10. Respond promptly when your lender requests information.

The goal is not to make your finances look artificially perfect.

Your goal is to provide accurate, well-documented information that allows the lender to evaluate your application.

What Not to Do After You Are Preapproved

Receiving your mortgage preapproval letter does not mean you can stop protecting your financial profile.

Until your mortgage closes, be cautious about making major financial changes.

You generally should avoid making unnecessary changes such as:

• Financing a new vehicle

• Opening several new credit cards

• Running up credit card balances

• Co-signing someone else’s loan

• Moving large amounts of money without documentation

• Changing jobs without understanding the mortgage implications

• Making large purchases on credit

• Missing debt payments

If an important change is unavoidable, tell your loan officer before assuming that it will not matter.

Your lender may review portions of your financial situation again before closing.

What Happens After You Get Preapproved?

Once you have a current mortgage preapproval, you can begin searching for homes within your comfortable price range.

When you find the right property, you may make an offer and include your preapproval letter when appropriate.

If you are considering contacting an owner directly about purchasing a property, [9 Simple Letters to a Homeowner to Buy Their House] includes a mortgage-preapproved buyer letter you can customize.

After a seller accepts your offer, your mortgage moves beyond preapproval toward the full loan process.

Your lender may then need to evaluate:

• Your signed purchase contract

• The property

• Appraisal results

• Title information

• Homeowners insurance

• Updated financial documents

• Final underwriting conditions

Your preapproval gave you a head start, but you still need to complete the lender’s remaining requirements.