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A mortgage preapproval is essentially the point where “I think I can buy a house” begins turning into an actual financial plan.
A lender reviews information about your financial situation and evaluates the financing you may qualify for under current guidelines.
The exact process varies by lender and loan program.
But the purpose is simple:
Find out what buying looks like before you commit to buying.
WHAT DOES THE LENDER REVIEW?
Depending on the loan and borrower, the lender may review information involving:
- Income
- Employment
- Credit
- Assets
- Debt
- Available funds
- Housing history
- Other financial obligations
They may request documents supporting those items.
IS PREAPPROVAL A GUARANTEE?
No.
This matters.
A preapproval is not the same thing as final loan approval.
Once you are under contract, the lender still has to evaluate the complete loan file.
The property becomes part of the equation.
An appraisal may be required.
Insurance matters.
Financial circumstances need to remain acceptable.
That is why Lisa tells buyers not to celebrate an accepted offer by immediately financing a truck and $18,000 worth of furniture.
WHY SELLERS CARE
Imagine you're selling your own house.
Buyer One submits an offer but has not spoken with a lender.
Buyer Two submits an offer with financing already reviewed and a lender prepared to answer questions about the file.
Who feels more prepared?
The second buyer.
That does not guarantee closing.
It creates confidence.
PREQUALIFICATION VS PREAPPROVAL
Terminology can vary by lender, so Lisa does not like pretending every lender uses these words identically.
Ask what has actually been reviewed.
Was it:
- A conversation?
- Self-reported information?
- Credit?
- Documents?
- Underwriting review?
The substance matters more than the label.
HOW MUCH SHOULD I GET PREAPPROVED FOR?
The lender can explain your qualification range.
Lisa then wants to talk about your comfort range.
You do not have to shop to the maximum.
If the payment at $600,000 makes you uncomfortable but $525,000 feels easy, that tells us something.
KEEP YOUR PREAPPROVAL CURRENT
Financial documents age.
Rates move.
Your financial situation may change.
If you pause your search for several months, the lender may need updated information.
Before making an offer, Lisa wants to know the financing picture is current.
