Getting ready to buy a home is much easier when you know what a lender looks at. This mortgage pre-approval checklist walks you through the steps to take before you apply, so you know where you stand and what to expect.
The short answer: check your credit, understand your income and debts, review your savings, gather your documents, set a comfortable budget, and avoid new debt. Then talk with a licensed loan officer about your options.
Why pre-approval matters
A pre-approval is a lender's review of your finances. It gives you a clearer picture of what you may be able to borrow, and it shows sellers you are a serious buyer. It is not a final loan approval or a commitment to lend. Your loan still depends on the property, the appraisal and final underwriting.
Starting early also gives you time to fix small problems, like an error on a credit report, before they slow you down.
Step 1: Check your credit reports and scores
Your credit history is one of the first things a lender reviews. Different loan programs have different credit guidelines, so there is no single number that fits everyone.
- Get your free credit reports from the official site, annualcreditreport.com.
- Read each report for accounts you do not recognize, wrong balances or late payments that were paid on time.
- Dispute errors directly with the credit bureau.
- Pay every bill on time while you prepare.
If your score is lower than you hoped, talk with a loan officer. Some programs, such as an FHA home loan, have different guidelines for eligible buyers.
Step 2: Know your income and debts
Lenders compare your monthly income with your monthly debts. This is often called your debt-to-income ratio. Make a simple list:
- Your gross monthly income, before taxes
- Car loans, student loans and credit card minimum payments
- Any other monthly debt, such as personal loans or child support
Seeing this list helps you understand how much room you have for a mortgage payment. If you are self-employed or have income from bonuses, commissions or side work, lenders usually look at a longer history of that income, so keep good records.
Step 3: Review your down payment and cash to close
Many buyers think they need 20 percent down. That is not true for every loan. The amount depends on the loan program and your situation. Learn about your choices on our first-time home buyer page.
Remember that you also need money for other costs:
- Down payment
- Closing costs, such as lender, title and appraisal fees
- Prepaid items, such as homeowners insurance and property taxes
- Cash reserves, which are savings left after closing
If a family member plans to give you money toward your down payment, tell your loan officer early. Gift funds usually need a signed letter and paperwork that shows where the money came from.
Step 4: Gather your documents
Having your paperwork ready makes the process faster. This is a common list. Your lender may ask for more or less.
- Photo ID
- Recent pay stubs
- W-2 forms, often for the last two years
- Federal tax returns, often for the last two years (especially if you are self-employed)
- Recent bank and savings account statements
- Statements for retirement or investment accounts
- A gift letter, if someone is helping with your down payment
- Rental history, if you are currently renting
- Written explanations for large deposits or gaps in employment
Save each file as a clear PDF in one folder so you can send it quickly.
Step 5: Set a comfortable monthly budget
What a lender approves and what feels comfortable are not always the same. Think about your own lifestyle, savings goals and other expenses.
Use our mortgage calculator to estimate a monthly principal and interest payment at different home prices and down payments. Remember that your real payment may also include property taxes, homeowners insurance and mortgage insurance. The calculator is for illustration only and is not a rate quote.
Step 6: Avoid big financial changes
Once you start the mortgage process, try to keep your finances steady until you close.
- Do not open new credit cards or take out new loans.
- Do not make large purchases on credit, such as furniture or a car.
- Do not change jobs without talking to your loan officer first.
- Do not move large amounts of money around without a paper trail.
- Keep paying all bills on time.
Lenders may check your credit and employment again before closing, so changes can affect your loan.
Your quick mortgage pre-approval checklist
- Pull and review your credit reports
- List your income and monthly debts
- Decide on a down payment and check your cash for closing costs
- Gather your documents in one folder
- Set a monthly budget you feel good about
- Keep your finances steady
- Talk with a licensed loan officer
Frequently asked questions
What is the difference between pre-qualification and pre-approval? A pre-qualification is usually a quick estimate based on information you provide. A pre-approval involves a deeper review of your documents and credit, so it is generally stronger when you make an offer. Neither is a final loan approval.
How long does a pre-approval last? It depends on the lender and your situation. Ask your loan officer how long yours is valid and what could change it.
Will getting pre-approved affect my credit? A pre-approval usually involves a credit check, which can show as an inquiry on your report. Ask your loan officer how credit inquiries are handled for your situation.
Do I need 20 percent down to get pre-approved? No. Down payment needs depend on the loan program. Some programs allow lower down payments for eligible buyers. A loan officer can explain what may fit you.
Ready for the next step?
Following this mortgage pre-approval checklist puts you in a stronger position before you shop for a home. When you are ready, get a free quote or get pre-approved with Alex.
You can also call Alex Al-Ammar at (313) 992-9898 or email Alex@vestalending.com.
This article is for general information only. It is not legal, tax or financial advice. Loan programs, guidelines and eligibility depend on your credit, income, property and lender requirements. Speak with a tax professional about questions on taxes.
