A mortgage pre-approval shows how much a lender is willing to lend you, and sellers often won’t accept an offer without one. Line up pre-approvals from two or three lenders in the weeks before you tour homes, so you can make an offer the day you find the right house.
Applying also shows you where you stand while there’s still time to fix things. A lender weighs your income, assets, debts, and credit, so a credit report error or a heavy debt load shows up now instead of after you’ve fallen for a house.
Make sure the letter is a real pre-approval. Not every lender means the same thing by pre-approval, and some will write a letter based only on numbers you report. Ask whether yours pulled your credit and verified your income and assets. A letter backed by documents is the kind a seller can take seriously.
Most letters expire after 60 to 90 days, and some lenders allow as few as 30. Apply when you’re ready to tour, not months ahead, and send applications to two or three lenders in the same few weeks. The Consumer Financial Protection Bureau says mortgage credit checks within a 45-day window count as a single inquiry, and shopping pays. Freddie Mac estimated that in late 2022, a second rate quote could have saved some borrowers as much as $600 a year.
A pre-approval doesn’t lock you in with that lender. The bureau suggests picking one after you’ve made an offer and received a Loan Estimate, the standard form that lists a loan’s rate and costs, from each lender you’re considering.
Have recent pay stubs and bank statements ready when you apply, and expect extra income paperwork if you’re self-employed.
The approved amount is the most a lender is willing to lend, not what you should spend. Decide the monthly payment you’re comfortable with, and cap your home search at the price it buys.
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