Let's clear up the confusion right away. Pre-approval is a lender's conditional commitment to lend you money for a home purchase - based on a preliminary review of your finances.
Think of pre-approval as a "conditional green light." You're approved to proceed, but the lender will verify everything again before actually giving you the money.
These terms get used interchangeably, but they're not the same thing.
Pre-qualification is a conversation. Pre-approval is a commitment. In competitive markets like DFW, you need actual pre-approval before house hunting.
Here's what to expect from start to finish:
This is one of the most common concerns - and mostly unfounded. Here's the reality:
A mortgage inquiry typically drops your score by 5-10 points temporarily. For most people, this is negligible and recovers within a few months.
Here's the part most people don't know: credit scoring models recognize that shopping for mortgage rates is smart financial behavior. So they give you a window - typically 14-45 days depending on the scoring model - where all mortgage inquiries count as just ONE inquiry. This means you can (and should) get pre-approved by multiple lenders to compare rates and terms.
Some questions during pre-approval might feel intrusive. Understanding why they're asked can help you feel more comfortable.
"How long have you been at your current job?"
Lenders like stability. Two years at the same employer is ideal, but they'll work with less if you have a solid work history in the same field.
"Are you salaried or hourly? Do you get bonuses or overtime?"
This determines how they calculate your income. Base salary is straightforward; variable income requires more documentation.
"Where is your down payment coming from?"
They need to verify the source of funds. Money that's been in your account for 2+ months is easy. Recent large deposits require explanation and documentation.
"Do you have any large deposits in the past 2-3 months?"
Any deposit over $1,000-$2,000 that isn't clearly a paycheck will need explanation. This isn't suspicion - it's required documentation.
"Do you pay child support or alimony?"
These are considered debts in your DTI calculation, even though they don't show on credit reports.
"Are you a co-signer on any loans?"
Co-signed debts count against your DTI unless you can prove the other person has made payments for 12+ months.
"Will this be your primary residence?"
Primary residences get the best rates. Investment properties and second homes have different (higher) rates and requirements.
"What price range are you looking at?"
This helps them determine your loan amount and whether you'll need jumbo loan territory (above $766,550 in most areas for 2024).
When you receive your pre-approval letter, here's what to look for:
If your letter says you're pre-approved for $400,000, that's the maximum LOAN amount - not the purchase price. With a 10% down payment, you could look at homes up to approximately $444,000.
The maximum isn't a target. Just because you CAN borrow $400,000 doesn't mean you SHOULD. The lender doesn't know about your travel plans, your gym membership, or your student loan payoff goals.
When you make an offer on a specific home, your lender will typically issue an updated letter showing pre-approval for that exact amount. This prevents sellers from knowing your maximum budget.
Most pre-approval letters are valid for 60-90 days. After that, you'll need to update your application with current financial information.
If your pre-approval expires before you find a home:
Even before expiration, certain actions can void your pre-approval:
From pre-approval through closing, maintain financial status quo. No big changes, no new debts, no major purchases.
Sometimes pre-approval comes back lower than hoped - or doesn't come at all. Here's how to handle it.
This isn't failure - it's information. Common reasons include:
What to do: Ask the lender specifically what's limiting your amount. Often there are actionable steps - pay down a credit card, provide additional documentation, or wait a few months for a recent raise to show in pay history.
A decline stings, but it's not the end:
Remember: many successful homeowners were declined on their first attempt. The difference is they used the feedback to improve their situation.
Yes - and here's why.
We recommend getting pre-approved by at least 3 lenders. This gives you enough data points to understand the market without overwhelming yourself.
Apply to all lenders within a 14-day window so all credit pulls count as one inquiry. Gather your documents once, then submit to multiple lenders in quick succession.
Pre-approval is a milestone, not the finish line. Here's what comes next:
Once you have an accepted offer, you'll move from pre-approval to actual loan processing:
The pre-approval work you've done makes this process faster and smoother. Most of your documentation is already on file.
Before you start the application:
