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Nerdy takeaways
- You’ll need to gather documentation to get preapproved, including Social Security numbers, proof of income, banking information and tax forms.
- You’ll want to get your financial ducks in a row before applying. This includes disputing incorrect data on your credit report or paying off some existing debts to signal to lenders that you can afford a mortgage.
- Prequalification is a more casual and informal way to gauge your readiness to buy a home, while preapproval is a more involved process best suited to borrowers who are ready and motivated to buy.
- Your preapproval will likely expire in three months or less.
Before you start looking for a new home, consider getting preapproved for a mortgage. This serves as a trial run for the mortgage application process. You’ll submit the same information that you would for a new mortgage, and the lender will send you a letter estimating your interest rate and how much you may be eligible to borrow.
This letter isn’t a binding promise, but it’s useful to have on hand before looking at homes for two reasons. For one, knowing how large of a mortgage you can qualify for (and what interest rate you can expect) gives you a foundation for your budget. Second, when you’re ready to make an offer, the preapproval letter shows the seller that you’re a serious buyer who can afford the home.
What to do to get preapproved for a home loan
Check your credit score
You can use NerdWallet's free credit score reporting tool to gain insight into your score. A credit score of at least 620 is recommended to qualify for a mortgage, and a higher one will qualify you for better rates.
Generally, a credit score of 740 or above will help you qualify for the best mortgage rates. You’ll want to get your score as high as possible before embarking on the homebuying journey, but you can also focus on lenders that specialize in working with borrowers with low scores if needed.
Check your credit history.
Request copies of your credit reports, and dispute any errors. If you find delinquent accounts, work with creditors to resolve the issues before applying for a home loan.
Calculate your debt-to-income ratio
Your debt-to-income ratio, or DTI, is the percentage of your monthly income that goes toward debt payments, including credit cards, student loans and car loans.
NerdWallet’s debt-to-income ratio calculator can help you estimate your DTI based on current debts and a prospective mortgage. Lenders prefer borrowers with a DTI of 36% or below, including the new mortgage payment, though it can be higher in some cases.
If your monthly debts are prohibitively high, you may need to address this through strategies like refinancing or paying down your debt more aggressively before you take on a mortgage.
Gather financial and personal information
You’ll need to provide the following for you and your co-borrower if you have one:
- Social Security numbers
- Current addresses
- Employment details
- W-2 tax forms for the last two years
- Pay stubs from the last two months
- Bank and investment account information
Additional documents you'll need if you're a self-employed applicant
- 1099 tax forms
- Two years of income tax returns
- Profit and loss statements (for business owners)
If your down payment will be coming from a gift or the sale of an asset, you’ll need a paper trail to prove that as well.
Contact more than one lender
Comparing offers from at least three lenders can help you compare rates and fees, and potentially save you thousands of dollars over a 30-year mortgage. You can compare customized quotes from lenders here.
Because preapproval involves a hard inquiry, your credit score will usually experience a slight (but temporary) hit. However, because all of your applications pertain to one loan, you’ll get dinged only one time, rather than getting penalized for every lender that grants you preapproval.
According to the Consumer Financial Protection Bureau (CFPB), your preapproval applications will count as only one credit inquiry if they are all submitted within a 45-day window.
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Preapproval vs. prequalification
Prequalification is a good first step when you’re not sure whether you’re financially ready to buy a home. A mortgage prequalification is usually based on an informal evaluation of your finances. This stage is totally self-reported — the lender won’t verify anything just yet.
You tell the lender about your credit, debt, income and assets, and the lender estimates whether you can qualify for a mortgage and how much you may be able to borrow.
See if you’re ready with our mortgage prequalification calculator.
If you get a thumbs-up during prequalification, preapproval is the next step. During the preapproval process, a lender pulls your credit report and reviews documents to verify your income, assets and debts.
Did you know...
Prequalification is not required. If you’re financially ready to buy a home and confident in your credit, you can skip prequalification and move straight to preapproval. This can save you time and give you a more accurate picture of your borrowing power right away. » MORE: Learn more about the difference between prequalification and preapproval
How far in advance should I get preapproved for a mortgage?
Mortgage preapproval is an offer by a lender to loan you a certain amount under specific terms. The offer expires after a certain amount of time, such as 30 or 90 days. It’s important to read the fine print and be aware of how long your preapproval letter is valid, but in any case, you should apply when you’re ready to start seriously looking for homes and are prepared to make an offer.
Preapproval is not a guarantee you will receive a loan, and the mortgage can still be denied. A home appraisal must be completed before a loan can close to ensure you aren’t paying more for the home than it’s worth. Also, the lender’s offer may not stand if your financial situation changes between preapproval and closing.
This is why it’s crucial to avoid any financial moves after preapproval that could make you appear riskier to lenders. Things not to do during mortgage preapproval include applying for new credit, making large purchases, or missing loan and credit card payments.
NerdWallet writer Isabella Angelos contributed to this story.
Frequently Asked Questions
Do mortgage preapprovals affect your credit score?
Mortgage preapprovals can result in a temporary dip in your credit score. A mortgage preapproval counts as what is known as a hard inquiry. The CFPB says grouping hard credit inquiries within a 45-day period will reduce the effect on your score.
How long does it take to get preapproved for a mortgage?
It can take several days or longer to get preapproved for a mortgage. The timeline varies by lender and how quickly you are able to provide the lender with the information it needs, including proof of your income and assets.
What documents do you need for a mortgage preapproval?
Tax returns, W-2s and pay stubs will be needed to verify your employment and income for mortgage preapproval. Lenders will also need a list of your monthly debt payments, such as student loans and credit cards. Be prepared to provide bank, retirement and investment account statements to show proof of your assets as well.
How much do you need to make to get preapproved for a $500,000 mortgage?
Qualifying for preapproval depends on more than just your income — lenders will also factor in your debts, credit score and financial history, such as how long you’ve been employed full-time and whether or not you’ve filed for bankruptcy.
For example, a borrower with an excellent credit score (at least 740), no foreclosures or bankruptcy filings, at least two years of full-time work experience, monthly debts of $500 and an annual income of $160,000 could potentially prequalify for a $500,000 mortgage.
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