Are you Pre-Approved?

By Jeremy DeLay, Tulsa Home + Design Realty

If you’ve ever bought a house or have been thinking about buying for the first time, you may have heard that you need to get pre-approved. But what does that mean, and is it really necessary? In this article, we will look at what pre-approval is, why it’s an important step in the home buying process, how to go about getting pre-approved for a loan, and the difference between being pre-approved and pre-qualified.

First, what does it mean to get pre-approved for a mortgage? Pre-approval is an evaluation done by a lender to determine a borrower’s creditworthiness and how big of a loan they are able to afford. It’s one of the first steps that any prospective buyer should take in the home buying process as it helps you establish your budget and shows that you are a serious buyer. Getting pre-approved for a loan isn’t required, but it is a very important step that you’ll want to include in your home-buying journey.

If it’s not required, why should you get pre-approved for a loan before you start shopping for houses? Great question! When you’re working with a Realtor to purchase a home, it’s so important that you’re able to clearly communicate not only what you’re looking for in a house, as well as where you hope to buy, but also what your true budget is. Setting clear and realistic expectations for yourself and your realtor will eliminate time spent on houses that aren’t in your reach and will also save sellers the time and trouble of getting their house ready to show for people who can’t back up their offers with a real loan.

A pre-approval letter from a lender lets sellers know that you are serious and are able to back up any offers you make on their home. Some sellers may not even accept offers without proof of pre-approval. This is especially true in a tough sellers’ market like we’re in at the writing of this article (May 2021). With steep competition for each listing, a pre-approval letter may give you an edge over other offers. Further, according to, pre-approval allows borrowers to close on a home more quickly, which is another competitive advantage in a tough market. Now that we’ve established some of the potential advantages to getting pre-approved, let’s look at the actual process.
The first step to obtaining a pre-approval letter is to find a lender. Your realtor should be able to recommend someone they know and have worked with, but it’s a good idea to do your research. You’ll be providing a lot of personal information, and you want to make sure you’re working with someone you trust and feel comfortable with. Most of the information you will need to provide to apply for pre-approval can be fairly easily obtained. They will first want to know your social security number so that they can look at your credit reports and scores. Lenders use credit scores as an indicator of a borrower’s ability to repay a loan. With better credit scores comes lower interest rates and less expensive loans. The credit score needed to secure a loan depends on the type of loan you’re applying for. The Federal Housing Administration requires a minimum score of 580 to qualify for the 3.5% low down payment advantage, but they will offer loans to people with scores as low as 500. For a conventional loan, the minimum score is 620. Some lenders may have their own, more strict credit score requirements, so you’ll just want to work with your lender to find the best loan option for your situation.

In addition to a credit check, you’ll also need to provide proof of employment, income verification, and copies of the last couple of years’ W2s or 1099s, depending on what type of employment you have. Additionally, they’ll likely want documentation showing your assets and debts, for example, bank statements, 401(k) statements, etc., as well as monthly debt payments like auto and student loans, and any other outstanding debts. Other documents you made need to provide include divorce records, bankruptcy or foreclosure records, and gift letters from any donors who may be gifting money for your down payment. The lender will take all of this information into consideration and come back with a decision as to what type of loan and how much you are pre-approved for. I love the way Jennifer Cook describes the pre-approval process in this article for Investopedia: “Think of a mortgage pre-approval as a physical exam for your finances. Lenders will likely poke and prod into all corners of your financial life as a way of trying to ensure you’ll repay your mortgage.”

Another term you may have heard in relation to obtaining a mortgage loan is pre-qualification. But what is pre-qualification and how is it different from pre-approval? Pre-qualification is something that happens before pre-approval, and it’s a way for borrowers to get an estimate of how much they can afford, without actually applying for a loan. In pre-qualification, the only information that lenders use to establish an estimated loan amount is submitted by the borrowers, whereas in pre-approval, lenders actually run reports and verify all of the data submitted. “A pre-qualification is a good indication of creditworthiness and the ability to borrow, but a pre-approval is the definitive word,” says Todd Kaderabek, a residential broker associate with Beverly-Hanks Realtors in Asheville, N.C. Like with a pre-approval letter, a pre-qualification letter can help signal that you are ready to start looking for a home, but it doesn’t carry the same weight as a pre-approval letter, which confirms an actual loan amount you are able and ready to secure. Pre-qualification is quicker and easier than pre-approval, usually only taking 1-3 days to complete.
If you think you’re ready to start looking for a home to buy, but haven’t talked to a lender, work with your realtor to find a lender who can help you get pre-approved for a loan that’s right for you. This will help you enter the market with confidence knowing what you can afford and enabling you to make solid offers on prospective homes. For more information on mortgage pre-approval, check out the links below.

Article Sources:,down%20payment%20requirement%20is%2010%25.

*At Tulsa Home + Design we work with clients at every step of their home-buying and owning journey to help them find and create spaces to live and grow. Call us today.

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