Mortgage pre-approval strengthens offers and clarifies buying power before home shopping. This guide explains the pre-approval process, required documentation, and how pre-approval differs from pre-qualification.

Getting pre-approved for a home loan is a critical early step in the homebuying process. Pre-approval involves a lender reviewing financial documents, running credit checks, and issuing a conditional commitment for a specific loan amount. Unlike informal pre-qualification, which estimates borrowing capacity based on self-reported information, pre-approval provides verified buying power and signals to sellers that the buyer is financially prepared. In competitive markets, a pre-approval letter often determines whether an offer is taken seriously or passed over.

The mortgage application process begins with selecting a lender and completing a detailed application that includes employment history, income, assets, and liabilities. Lenders require documentation such as recent pay stubs, tax returns, bank statements, and identification. They verify income through W-2 forms or profit-and-loss statements for self-employed borrowers, and assess assets to confirm funds for down payment and closing costs. A hard credit check evaluates credit history, outstanding debts, and repayment behavior, all of which influence loan approval and interest rates.

Debt-to-income ratio is a key metric lenders use to assess affordability. DTI compares monthly debt obligations—including the proposed mortgage payment, car loans, student loans, and credit cards—to gross monthly income. Most lenders prefer DTI ratios below 43 percent, though some programs allow higher ratios with compensating factors such as substantial reserves or excellent credit. Lowering existing debt before applying improves DTI and increases the loan amount for which a buyer qualifies, expanding home shopping options.

Once approved, the lender issues a pre-approval letter stating the maximum loan amount, subject to property appraisal and final underwriting. Pre-approval typically remains valid for 60 to 90 days, giving buyers a clear timeframe to find and close on a home. During this period, avoid major financial changes—such as opening new credit accounts, making large purchases, or changing jobs—that could affect approval status. Securing pre-approval early streamlines the home shopping process, accelerates offer acceptance, and reduces stress during one of life's most significant financial transactions.