Getting Pre-Approved for your loan

Why It Is Wise To Get A Mortgage Pre-Approval Before Shopping For A Home

Shopping for a house before you know whether you will get the money to buy the home is ill-advised. You may be lucky and get a mortgage loan, but it could be significantly less than what you had hoped for. This will mean that you will have to start the home search all over again in order to find a home that you can afford. You could also be unlucky, and the bank may deny you the mortgage loan altogether. This will mean that you will have wasted a lot of time and effort. Therefore, in order to shop for a house with confidence, you need to get a pre-approval from a mortgage lender.

What exactly is a pre-approval?

This is basically a letter from a lending institution that shows their commitment towards funding your mortgage loan, as long as you meet certain regulations such as appraising the property. You could request for a loan of a certain amount, but the lender could give you less. The amount that they pre-approve will depend on your debt-to-income ratio, your real income, and your credit score. The commitment letter that they give you will be valid for about sixty to ninety days.

Reasons for getting your mortgage pre-approved

If you go ahead and search for a house without being sure of how much the bank is willing to lend you, you could be very disappointed. The following are the main reasons why you should get the green light from the bank before you go on your house hunt:

  • The lender will decide how much they are willing to give you in the pre-approval letter. This will give you a rough budget, and it will help you to search for a home that is within this budget.
  • There are a lot of people who approach realtors every day searching for a house, but some of them are never serious. However, if you have the pre-approval letter with you, the realtor will know that you are a serious buyer. They will show you the best house within that price range as they know that you are more likely to buy it.
  • Most sellers get bids from people who are not serious about buying the home. That is why some of them ask their bidders to submit a copy of their pre-approval letter when they place their bids. Therefore, having this commitment letter will allow you to place an offer on more homes.
  • If you are bidding for a house with a lot of other buyers who do not have their pre-approval letter, you are more likely to be considered. This is because the seller will know that you are a serious buyer who is not likely to change your mind because of lack of funds.

How can you get a lender to pre-approve your mortgage?

A lender will pre-approve a loan if they have confidence in your paying ability. They will determine this by looking at your credit score and your debt-to-income ratio. Therefore, before you approach any bank, you should ask for your credit report. Ensure that it reflects your true financial situation. In case there are any mistakes, you should correct them. If you have too many loans, and you have some cash reserves, you can reduce the amount so that your debt-to-income ratio is lower. Most lending institutions will approve the mortgage if this ratio is less than 36%.

After you have ensured that the credit report is satisfactory, you can approach a lending institution and express your intention to buy a house. The lender will ask you to submit some information on your financial circumstances. Some of the details and documents that they will ask for include:

  • Pay slips. If you have two or three jobs, you should submit pay slips for all of them.
  • Commissions
  • Bank statements
  • Overtime
  • Interests and bonuses
  • Social security payments
  • Pensions
  • Child support
  • Alimony
  • Retirement benefits
  • W-2 forms for two years
  • Tax returns
  • Social security number
  • Your credit report.

In case you have a co-signer, they will also have to submit all of these details.

The mortgage lender will look through this information in order to determine if you are credit-worthy. They will also use this information to determine the amount of money that you qualify for. If you want to increase your chances of getting the pre-approval, you should ensure that all the information you provide is accurate and up-to-date. You should also cooperate with the lenders and give them all the information that they ask for.


Getting your mortgage pre-approved means that you will not have to give up on your dream home after you place a bid on it. You can shop for a home that is within your budget, and if you find one that you love, you will place an offer. If it is accepted, you will easily purchase it as you will have an easier time getting the funds from your bank or mortgage lender.

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