How to Get Pre-Approved in 3 Steps

How to Get Pre-approved in 3 Steps

Unless you are buying a house with all cash you will need to get a mortgage. When you’re ready to get serious about buying a house it is important to know how the mortgage process works and all the different loan options available. A mortgage pre-approval is basically a promise from the lender that you’re qualified to borrow up to a certain amount of money and a specific interest rate.


  1. Knowing your income & debts
    • Lenders need to know all your monthly debts and your take home pay. Lenders look at your debt-to-income ratio to determine how much you can actually afford.
    • Lenders look at other important factors like your credit score. They run a credit check when you’re going through the pre-approval process. Depending how good your credit report determines what kind of loan you qualify for and how much your monthly payments will be.

SN: You don’t want to start a new job, take out new debt or do anything that could negatively affect your credit score before or after applying for a mortgage.

  1. Finding a Lender
    • The most common types of lenders are banks, credit unions, and online financial institutions. Not all lenders offer the same rates or loan types, so it’s important to shop around. We prefer to use a local lender such as John Adams Mortgage. As a lender, they originate, process, underwrite, close and insure all their own loans. Unlike working with a big bank, you are always talking to the same person and your file doesn’t get lost in the shuffle. But it is still a good idea to talk to a few different lenders and try to compare loan rates, fees, and product attributes.
  1. Getting Pre-Approved
    • Once you select a mortgage lender, you should apply to get pre-approved. It’s better to get pre-approved before going out and looking at houses so you have a better idea of what you can afford and how much you can put down. Also, sellers are more likely going to accept an offer with a pre-approval letter. And if it’s a multiple offer situation you will defiantly want a pre-approval letter with your offer. Right now, in the Detroit area the market has been very hot with many multiple offer situations. Having a strong pre-approval letter from a reputable lender will help your offer.
    • Your work history
      • Lenders will ask for your W2 forms from the past two years, pay stubs for the past 1 to 3 months, and personal tax returns for the past two years
      • If you’re self-employed; business and personal tax returns for the past two years, year-to-date profit and loss statements, year-to-date balance sheet.
    • Total Debt
      • Names, balances, and account numbers for your credit cards, car payments, student loans, any other loans, store lines of credit, other consumer debt with recurring monthly payments, alimony payments, child support payments, and divorce decree.
    • Down Payment
      • The lender will need documentation of a down payment such as a checking and savings statement showing the balance from the previous two months.
      • If parents are helping with a down payment, the lender will need documentation showing sources of any large deposits.

Once you’re pre-approved, you’ll receive a pre-approval letter.

Consulting with a lender before you start the home buying process can save a lot of time and heart ache. Sometimes, buyers think they can afford for way more than they actually can. It’s important to get a pre-approval so you know what you can afford and therefore can focus on looking at homes that are within your budget.

Lenders will approve you to your highest possible amount but it’s also important to keep in mind that just because you’ve been pre-approved to a certain amount doesn’t mean you can actually afford that much. You don’t want to be house poor and having your entire paycheck go to your house payments. It’s smart to set a budget to be sure. Lenders can run the numbers during your home searching process and give you an estimate of what your monthly mortgage payments will be. It’s extremely important that you feel comfortable with that number.

Bottom line – before starting the home buying process it’s smart to get a pre-approval letter so you’re one step closer to your dream home.




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