An In-Depth Look At The Mortgage Pre-Approval Process

May 18, 2021
Last updated:
October 11, 2022
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Getting pre-approved is essential to securing a mortgage loan. As a result, it helps to be prepared ahead of time and understand how the process has changed for the better over the years and with the help of online lending.

If you are shopping for a home, you should get a mortgage pre-approval. A mortgage pre-approval helps you understand how much house you can afford, makes you more attractive to sellers, and alerts you to problems that may affect your ability to get or qualify for a home loan. This is different from getting a mortgage pre-qualification, which requires no documents and will not give you the backing you need to make an offer on a house.

That said, to get pre-approved, you will need to provide your lender with documents that they will use to verify your personal, employment, and financial information. This is pretty much the entire process in a nutshell; however, it was not always so simple. But, before getting into the pre-approval process’s overall evolution, it is beneficial to go over what a mortgage pre-approval is and why it is crucial.

What Is A Mortgage Pre-Approval?

A mortgage pre-approval is a letter that your lending institution or mortgage company sends you that verifies that you are pre-approved for a specific loan amount. As briefly suggested, with the proper documentation, your lender can authenticate all your pertinent home buying information and help you get the ball rolling on a home purchase. In fact, when you apply for mortgage pre-approval, you are essentially going through many of the key steps for applying for a home loan(with a few exceptions).

Nevertheless, in order to authenticate all your information and ultimately approve you for a specific loan amount, lenders (or a loan officer) will pull a hard credit report, evaluate your debt-to-income (DTI) ratio, and assess your ability to meet a minimum down payment. Upon approval, you can start the house-hunting process and look for a home within your budget. Plus, with a pre-approval letter in hand, you can prove to sellers that you are a serious buyer—one that a lending institution has properly vetted.

How Was The Pre-Approval Process Conducted In The Past?

In the past, getting pre-approved from a mortgage lender also involved a somewhat lengthy interview process and an in-depth overview of one’s finances with multiple mortgage professionals, including a mortgage advisor. Questions like what are your plans in the next five to ten years, or do you have any “black marks” on your credit, you had to be prepared for.

Moreover, you needed to be able to provide extensive documentation and/or explanations for any and all of your potential lender’s inquiries, which frequently involved contacting your banks, employer(s), and so on. After said interview then came the waiting game.

How Do Borrowers Get Pre-Approved Now?

The good news is that nowadays, you simply need to fill out an online loan application, get a credit check, and provide various forms of documentation to your chosen lender or mortgage company. Just as before, your potential lender will pull your credit report to determine a loan amount for which you qualify. Of course, here, you will need to provide proof of income, copies of financial (bank and investment) account documentation, and verify your personal information. This still includes Social Security numbers, current addresses, and employment details for you and your co-borrower, if you have one.

In regard to your proof of income, you will need to submit your recent W-2 tax form, 1099s if you have additional income sources, and pay stubs (two years of continuous employment is preferred).

Note, if you are self-employed or plan to use gift money as a down payment, you will need to provide information regarding either situation. But be that as it may, there is no denying that today’s pre-approval process is short and simple. Plus, it does not involve an interview, and you can easily provide the information mentioned above online or upload it to your lender’s website within a matter of minutes.

What Are The Benefits Of Getting Pre-Approved Online And In General?

With online lending portals and applications, you can now be pre-approved in as little as a few hours. Some pre-approvals may take a day or two at most but gone are the days of waiting what seems like forever for a pre-approval letter. What’s more, online lending, in general, saves you valuable time, money and makes the pre-approval and home buying processes run more smoothly.

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What Can You Do To Ensure The Pre-Approval Process Goes Smoothly?

In the end, familiarizing yourself with the required documents and compiling the necessary documentation asap will make the entire process more streamlined. Moreover, if you prepare yourself for the pre-approval process well in advance, by taking a hard look at your finances, improving your overall credit score, reducing your DTI, and addressing any potential issues that may arise before applying, there is no reason things shouldn’t go off without a hitch. That said, buying a home is an exciting time – one that will be far less stressful if you are fully prepared for the many steps along the way. It is also important to note that a pre-approval is not a guarantee, as your financial situation may change and other crucial steps in the home buying process need to occur before you can close on a home.

However, getting pre-approved, especially in the current real estate market, shows that you are a serious homebuyer and will help give you a competitive edge. So, if you have any questions about the pre-approval process or the home buying process in general, do not hesitate to contact a local mortgage professional for further assistance.

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Ready To Apply For A Home Mortgage?

Do you have questions about home loans or obtaining a mortgage before you start the home shopping process? Or are you simply ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.

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