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Writer's pictureNorthpoint Mortgage, Inc.

Six Steps to Prepare for a Mortgage Pre-Approval





Six Steps to Prepare for a Mortgage Pre-Approval


For starters... What is the definition of mortgage pre-approval?!


Mortgage pre-approval is the process of a loan officer looking over your finances- including credit history, proof of income, assets, and employment verification. After evaluating the information, a loan officer will approve a specific loan amount. Individuals who have applied for a pre-approval will receive documentation that states the approved loan amount. The approval lasts for a particular period, typically 60 to 90 days.

Mortgage pre-approval does not guarantee you will be granted a loan. The mortgage can still be denied. However, a pre-approval letter is proof a lender is willing to work with you. When your home is under contract, your loan officer will review the documents and finalize the loan offer.

A mortgage pre-approval letter provides advantages during the homebuying process. It signals to realtors and sellers that you are a serious home buyer. Pre-approval is often required before signing a contract. A mortgage pre-approval letter demonstrates your ability to receive financing.

These are the 6 steps to take before applying for mortgage pre-approval.

1. Improve Credit Worthiness

Your credit score is defined by your credit history. Your history includes number of accounts you have opened and closed, amount of debt on various accounts, and timeliness of repayment. A credit score shows lenders how reliable you are as an investment. If your score is not where you need it to be take the time to work on it. There are resources online to help determine a good credit score. There is no easy fix for a low credit score. You must pay bills on time and reduce debt. Obtaining a higher credit score qualifies you for a lower interest rate. This saves you money in the long run. You cannot hide anything from the lender, and you must be honest about your debts. It is crucial to understand your credit score before moving forward with the pre-approval process.

2. Review Credit History

After you have worked on improving your credit, you should review your credit report to make sure everything is in order. Look into receiving credit reports from the credit reporting agencies Equifax, Experian, and TransUnion. The reports are based on your credit history in addition to personal information such as name, address, and employer.

Sort out any disputes with credit agencies before meeting with a loan officer.

3. Learn and Gather Requirements for Mortgage Pre-Approval

Gather all necessary documentation for pre-approval.

Documentation such as Social Security card or number, driver’s license or U.S. passport, and green card copy, if you are not a U.S. citizen, will be used for identification purposes.

In addition to identification, proof of income and employment is required for the mortgage pre-approval process. The materials include:


● Pay stubs from the last 30 days

● W-2 forms from the last two years

● Year-to-date income

● Proof of additional income

● Last two years of personal federal income tax returns with all pages and schedules

● If self-employed, last two years of business federal income tax returns with all pages and schedules

Also, you will need to disclose rent payments, any alimony received or paid, bankruptcy, and any foreclosure information.

Proof of assets is required in the application process. You will need to provide a record of bank statements, retirement accounts, and brokerage accounts.

4. Create a Budget

Purchasing a house is a huge burden to take on financially. You should know what you can afford in terms of your budget. Now is the time to evaluate your income as well as your monthly expenses. If the homes you hope to purchase fit your budget, now might be the right time to start the home search process.

5. Understand That Now Does Not Have To Be The Time

Remember that pre-approval letters expire. Most pre-approval letters last for 60-90 days. Use the time before you apply to understand where you are financially and if you are in a place to fit a mortgage in your budget. You should be confident that you can fit a mortgage into your budget because 90 days will go quickly.

A pre-approval letter does not force you to commit to anything, but you would need to repeat the paperwork if you chose a new lender. If you stay with the same lender after the expiration date, they will need to re-evaluate a more current form of what they reviewed previously. Even if now is not the time for you, the pre-mortgage approval process provides you with knowledge for the future.

6. Research Different Loan Officers

Investigate different loan officers before deciding on the loan officer for you. Ask family and friends for recommendations, review testimonials online, and find a trustworthy company. Loan offers, rates, and fees are important; but trust in a loan officer is essential. You should find someone who you feel has your best interest in mind for your home buying situation.


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