Summary
Getting pre-approved for a mortgage is one of the smartest moves a homebuyer can make. It shows sellers you're serious, clarifies your budget, and helps you spot potential financial issues early. This quick but thorough process can speed up closing and give you a competitive edge, especially in a fast-moving market like today's. Learn how it works and how to get started.To say home-buying is complicated is like saying that chess is a board game or that Everest is steep. You have budgets and credit scores, deadlines and paperwork to consider (not to mention the actual work of finding the right home for you) which, in the end, makes those tools and strategies that simplify the process all the more valuable.
A pre-approval letter is one of those tools. It saves you time, money, and the heartache that has unfortunately discouraged many would-be home buyers.
So, what is it?
And how do you get one?
What Is Mortgage Pre-Approval?
Pre-approval is the formal process by which a lender reviews your financial details. They look at your income, credit score, debts, and savings, and determine just how much they’re willing to lend you. If they like what they see, you’ll receive a pre-approval letter detailing your estimated loan amount, the loan type, and a proposed interest rate.
Think of your pre-approval letter like a passport. It’s the defining difference between someone who is simply dreaming about traveling abroad and someone who is planning a trip. It tells agents and sellers that working with you won’t be a waste of their time.
Before we move on, it is important to note that pre-qualification is not pre-approval. Investopedia has a great article that explains the difference here. Pre-qualification is a quick estimate of what you might be able to borrow, based on self-reported information without formal verification.
Pre-approval, on the other hand, involves a hard credit check and document verification. If you filled out a quick online form or answered a questionnaire without submitting documents, you may only be pre-qualified. It’s worth checking with your lender to confirm.
What Are the Benefits of Getting Pre-Approved?
Know What You Can Afford
Pre-approval draws the borders on the map of your budget. With the letter in hand, you won’t have to waste time on properties beyond your budget and, instead, focus on the ones that fit your budget.
Gain a Competitive Edge
In today’s real estate market, good homes rarely linger. Having a pre-approval letter in hand shows sellers that you’re serious, solvent, and ready to sign. If you’re up against other buyers with higher offers, it could even tip the scales in your favor.
Speed Up the Closing
Since pre-approved buyers already have their finances vetted, the underwriting process is smoother and faster. That matters because sometimes the difference between you getting the house of your dreams and having it poached from under you by a higher offer is time.
Spot Financial Issues Early
Going through the pre-approval process can uncover those hidden snags—like high debt-to-income ratios or errors on your credit report—and give you time to fix them, so they don’t surprise you in the middle of a deal. By addressing these concerns early, you significantly diminish the risk that something could go wrong.
How Do I Get Pre-Approved?
It’s easier than you’d think, and starting now puts you in the best position to save later. Here’s how you do it:
✅Gather Your Documents
Most lenders will ask for:
• Recent pay stubs
• W-2s or 1099s from the last two years
• Bank and retirement account statements
• Government-issued IDs (driver’s license, passport)
• And a list of your current debts (credit cards, student loans, car loans, etc.)
If you’re self-employed, they’ll probably ask for business tax returns or profit-and-loss statements.
✅ Review Your Credit
Before your lender checks your credit score, you should check it yourself. You are entitled, after all, to one free report per bureau per year at AnnualCreditReport.com. Here are things to look for when you get your report:
• Errors or duplicate entries
• Unexplained score drops
• Outdated or incorrect accounts
Even a modest boost to your credit can reduce your interest rate and save you thousands over the life of the loan. For more information on how to improve your score, check out our blog here.
✅ Choose the Right Lending Partner
You are looking for real human guidance, someone, not an organization or a brand. A mortgage broker is an actual person who will guide you through the process. Trust is everything, not just that they have your best interests at heart, but that they have the expertise required to put you in your dream home.
How do you find that person? One useful tool is HomeAdvantage®, a platform that connects users to trusted real estate agents and offers cash rewards at closing. You don’t need to be a First Service Credit Union member to use the HomeAdvantage® program to search for homes or find an agent. However, you do need to be a member and finance your mortgage through the credit union to qualify for the Cash Rewards at closing.
✅ Submit the Application
Once your paperwork is cleared and your credit pulled, the lender will determine just how much you can borrow and issue a pre-approval letter. These are typically valid for two to three months. If your letter expires before you find a house, don’t worry. Its validity can almost always be refreshed with updated documents.
Speaking of refreshing your rates, it is crucial that you keep your financial situation stable after securing pre-approval. Avoid opening new lines of credit, making large purchases, or missing payments, as these actions will negatively impact your credit score and debt-to-income ratio, which could jeopardize your loan approval.
Also, refrain from depositing large, untraceable sums into your bank accounts without the proper documentation, as lenders may view these as red flags. Consistency is key. Even small financial shifts—like financing a couch or switching jobs—can trigger a re-evaluation and delay your closing.
✅Rate Lock Protection: Get It If You Can
If you apply for a home loan when interest rates are rising, some lenders might do you the favor of locking your rate at the time of pre-approval. It’s a bit like boarding a train minutes before the fares go up, and one more way to make the process less stressful. If you’re worried about rates going up, this should be something you discuss with your lender.
The FSCU Advantage
At First Service Credit Union, we don’t just issue mortgages; we walk with you through the door. From competitive rates and the support of real humans to digital tools and local agents, we’re here to guide you every step of the way, making the journey to homeownership clearer, faster, and more rewarding.
Ready to begin?
Visit FSCU.com/Mortgage or speak with one of our home loan specialists at 713-676-8920, and get pre-approved today!