Mortgage pre-approval is the process by which a lender commits to a maximum loan amount for you after a thorough review of your income, assets and credit history. In other words, it is a formal recognition that you have the financial ability to purchase a home, paving the way for a home purchase.

Advantages of mortgage pre-approval

Boosts seller confidence

Sellers are usually more willing to accept buyers who have been pre-approved for a loan because it means a more secure transaction.

Avoids Transaction Risks

Buyers who are not pre-approved may cause the deal to fall through if their loan application is denied, and pre-approval reduces this risk.

Prioritize home tours

Some sellers and brokers require buyers to be pre-approved in order to tour a home, especially in popular markets.

How do I get pre-approved?

Prepare the following documents and submit them to your lender:

Last 30 days of pay stubs and two years of W2 forms

Bank account and investment account statements

Difference between pre-approval and pre-review

Pre-approval: Based on basic financial information provided by the buyer, the lender makes an initial assessment of the amount that can be borrowed, but there is no formal commitment.

Pre-approval: After a rigorous review, the lender confirms your eligibility for the loan and issues a formal letter.

Pre-approval provides sellers with an extra sense of security and makes them more inclined to work with you, thus increasing your chances of winning against the competition.

Although pre-approval requires quite a bit of preparation, it is an essential step in the home buying process. Completing this step ahead of time not only improves your odds of successfully purchasing a home, but it also allows you to move towards your dream home with greater confidence!