What a lender reviews
A useful preapproval goes beyond a quick online estimate. The lender typically reviews credit, qualifying income, employment or business history, funds for closing, reserves, monthly obligations and the intended occupancy and property type.
- Recent income and employment documentation
- Bank, investment and eligible gift-fund records
- Credit history and monthly debt obligations
- Down-payment and closing-cost strategy
- Loan program, occupancy and property assumptions
Prequalification versus preapproval
A prequalification may rely largely on information supplied by the borrower. A documented preapproval generally includes a deeper review of supporting records. Neither is a commitment to lend, and the property, appraisal, title, insurance and final underwriting remain outstanding.
Prepare before making an offer
Avoid opening new credit, moving large sums without records or changing employment without discussing the effect with the mortgage professional. Keep documents current and ask for payment scenarios that include estimated taxes, insurance, mortgage insurance and association dues where applicable.
Common questions
Frequently asked questions
Does a mortgage preapproval affect credit?
Many documented preapprovals use a credit inquiry. The type and impact can vary, so ask the mortgage professional what inquiry will be used before authorizing it.
How long is a preapproval valid?
Preapproval letters and supporting documents are time-sensitive. Credit, income, assets, rates and program requirements can change, so the file may need to be refreshed during the home search.
Is a preapproval a guarantee that the loan will close?
No. Final approval depends on the complete borrower file, acceptable property, appraisal, title, insurance, underwriting and other applicable requirements.