What is a Mortgage Pre-Approval?

March 21, 2018 | 2 min read | The mortgage process

In today’s competitive real estate market, pre-approvals are more crucial than ever. A mortgage pre-approval states how much money you can borrow and how much house you can afford based upon the financial information given to your mortgage company.

What is a Mortgage Pre-Approval?

A mortgage pre-approval states how much money you can borrow and how much house you can afford based upon the financial information given to your mortgage company.

When Should I Get Pre-Approved for a Mortgage?

It is beneficial to get pre-approved for a mortgage before you begin your house search during the home buying process because a pre-approval outlines how much house you can afford. Therefore, the pre-approval will help you create a budget and give you confidence while you search for the right property. Having a mortgage pre-approval may prove you are a serious buyer and may be beneficial during a bidding war on a home.

Documents Needed for a Mortgage Pre-Approval

Typically, a mortgage company will request the following documents for a mortgage pre-approval:

  • Last two years of Federal Tax Returns (personal & business)
  • Last two years W-2 statements
  • Two most recent pay stubs
  • Two most recent months bank/brokerage statements
  • Copy of ID’s

How Long are Pre-Approvals Good For?

A mortgage pre-approval is usually good for 60-90 days. If you’re still searching for a property when the pre-approval expires, get in touch with your mortgage company to get a new one. A mortgage pre-approval has a time frame because the company bases it on your most recent financial information.

Difference Between Pre-Approval and Pre Qualification

A pre-approval is a written commitment from a mortgage company that states how much you will qualify for, and how much house you can afford. A pre-approval may also indicate conditions that must be satisfied for the commitment to be binding.

A pre-qualification is a simple, non-binding letter drawn up by a mortgage specialist that states that they have reviewed your financial information. A pre-qualification only provides an estimated or approximate loan amount and is not a commitment.