Pre-Approval in 2023: What You Need To Know

One of the first steps in your home-buying journey is getting pre-approved. To understand why it’s such an important step, you must understand what pre-approval is and what it does for you.

Definition: the process in which a lender reviews your finances and determines what type of loan programs you qualify for and how much you are approved to borrow including at what rate.

Pre-approval gives you critical information about the home-buying process that’ll help you understand your options and what you may be able to borrow.

How to get pre-approved for a home loan?

You need to submit all of the below documents to the lender so they can determine what they’d be willing to loan you. Pre-approvals are different from pre-qualifications in that in a pre-approval your finances are looked at in a more detailed and comprehensive way; while a pre-qualification is more superficial. With higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important. 

Once you have received a pre-approval and have a clear breakdown of the numbers you’ll know exactly how much you can borrow and the type of home you can afford. Now you're ready to house hunt! 

To help streamline the pre-approval process here are the most common items needed to get pre-approved: 

• Last two years of Tax Returns (All Pages) 
• Last two years of W2s or 1099s
• Paystubs for the past month 
• Bank Statements (all pages) 
• Driver’s License copy or Government Photo ID 
• SSN Card Copy 
• Green Card copy  or Employment Authorization Card (If applicable) 
• Last two years of Business Tax Returns (if applicable) 

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Pre-Approval Helps Show You’re a Serious Buyer

A seller may be more receptive to your offer if you have pre-approval because it demonstrates your commitment to buying their home. This process is still a crucial component of making a strong offer when buying real estate, even though you might not encounter the fierce bidding wars that you would have encountered buying a property during the pandemic.

“From the seller’s perspective, a preapproval letter from a reputable local lender often can make the difference between accepting and rejecting an offer.”

- Forbes 

“Pre-approval maximizes the chances you’ll be able to close the deal – and sellers want to see that. The fact that a pre-approval gives you a better chance of getting your offer accepted is undoubtedly the most important reason to complete this step . . .”  

- The Motley Fool

Getting pre-approved is an important first step in the home-buying process. Connect with us to work with our preferred lenders to ensure you have the tools you need to buy a home in today's market.