What Does the Mortgage Preapproval Process Look Like?

Three people discussing mortgage options

When making a home purchase, only around 32% of aspiring homeowners are cash buyers. That means, for the majority, turning to mortgages is the norm. At the start of that process, homebuyers typically get preapproved, ensuring they know the maximum amount a lender is willing to provide. Here’s a look at what the mortgage preapproval process looks like, including what buyers need to provide, how long it lasts, and more.

What Do Lenders Look At?

During the mortgage preapproval process, lenders are generally concerned with whether a homebuyer can repay the loan. As a result, they focus on the affordability of the mortgage, often by examining a borrower’s income, debts, and debt-to-income ratio.

Additionally, lenders examine a borrower’s credit score and history. That helps them spot red flags that may indicate a borrower may not meet the repayment terms, assessing the risk to determine whether to preapprove the aspiring homeowner for financing and what interest rate to offer.

What Documents Do You Need to Provide?

Generally, homeowners need to give a lender specific information and documents to get preapproved for a mortgage. As with essentially any loan, the first step is to provide contact details and certain personally identifiable information (PII), such as birth dates and Social Security numbers.

Next, aspiring homeowners must have documents available to support other provided information. For example, proof of income may mean sending in copies of bank statements, tax returns, W-2s, and 1099s. Bank and other financial account statements are often necessary for proof of assets, and copies of government-issued IDs are usually required to prove the applicant’s identity.

Finally, homebuyers usually need to provide written consent to allow the lender to perform a credit check. This can include a signature on a physical document when completing a preapproval in-person at a lending institution or a digital signature when seeking preapproval online.

How Early Should You Get Preapproved?

In most cases, homebuyers should get preapproved for a mortgage before they begin house hunting. In many cases, having a preapproval letter makes it easier to work with a real estate agent, as the agent is more likely to view the borrower as a serious buyer. Plus, it lets homebuyers know the upper limit of what the lender will potentially provide, giving them a price target that can help narrow down their home search.

A mortgage preapproval also helps during the offer phase. It shows the seller that the borrower is already working to arrange financing and that a lender is likely to fund the home loan. That can reduce the risk of the deal falling through, essentially giving the seller some peace of mind.

How Long Does a Preapproval Last?

A mortgage preapproval is only valid for a specific amount of time, the exact length of which can vary by lender. However, most stand behind the preapproval for at least 60 days, and some may consider preapprovals valid for up to 90 days.

If a buyer doesn’t find a suitable property by the time the preapproval is no longer valid, they can typically submit a renewal request. What’s needed alongside the request can also vary by lender, but it typically includes verifying previously provided details and providing updated information regarding the buyer’s financial state.