Pre-approval is a formal step where a lender reviews your financial documents and credit history to determine how much you’re conditionally qualified to borrow for a mortgage. You’ll receive a pre-approval letter stating your maximum loan amount, estimated interest rate and other key terms—proof to sellers and agents that you’re a serious, finance-ready buyer.
Pre-qualification is an informal estimate based on self-reported income and debts. By contrast, pre-approval requires a hard credit check and verified documentation, giving you a stronger position in a competitive market.
Having a pre-approval letter lets you:
You’ll complete an online or in-person form with personal details, employment history and basic financial data. The lender will request permission for a hard credit inquiry.
The lender evaluates your credit score and debt-to-income ratio (DTI). A lower DTI and higher score boost your borrowing power and improve your interest rate options.
Lenders typically approve 80–95% of your gross monthly income minus debts. The result is the maximum mortgage they conditionally back.
Most conventional loans ask for a score of 620+, FHA loans may go as low as 580. Higher scores unlock better rates and lower down payments.
A DTI under 43% is the ceiling for many programs. Every added debt payment can shave thousands off your approved amount.
Most lenders return a decision within 24–48 hours of receiving full documentation; some online services offer same-day letters.
Pre-approval letters typically expire in 60–90 days (sometimes up to 120). If you haven’t closed or found a home, you’ll need updated pay stubs, bank statements and a refreshed credit check.
Sellers prioritize offers backed by verified financing—especially in hot markets where multiple bids compete.
With documents already in the lender’s hands, you can move quickly from accepted offer to underwriting to closing.
Some lenders charge application or appraisal fees at pre-approval. The hard credit inquiry may lower your score by a few points temporarily.
Pre-approval is conditional. Final approval depends on appraisal, title search, updated financials and compliance with all underwriting guidelines.
Sixty days later, Sarah provided updated pay stubs and a fresh credit pull to extend her approval for another 90 days, keeping her deal on track.
Fees vary by lender: some charge only a credit-pull fee, others bundle costs into an application or appraisal charge.
A single hard inquiry can lower your score by a few points, but multiple inquiries within a 30-day window count as one when rate-shopping.
You can apply to multiple lenders, but each will issue its own letter. Use comparison to find the best rate and terms.
No—final approval hinges on appraisal, title search, underwriter review and no material changes to your finances.
You start touring homes in your approved price range, make offers, and once one is accepted, move quickly into the formal underwriting and closing phase.
Compare fees, rates and responsiveness. Seek a lender familiar with your local market and an agent who values pre-approved buyers.
With pre-approval in hand, you can focus on finding the perfect home, knowing your financing is secure and your offer carries extra weight.
