What Is a Mortgage Pre Approval?
A mortgage pre-approval is an official letter from your lender indicating how much you could be offered for a mortgage. This is based on your credit report, income, assets and liabilities. It shows you what you can afford to spend and proves to sellers that you are a genuine buyer. It is not an official approval for your loan as you will still need to view your property, the appraisal and final underwriting.
Quick Facts
| Question | Answer |
|---|---|
| What is it? | A written estimate of the loan amount you may qualify for, based on verified documents |
| What do you need? | ID, income documents, tax returns, bank statements and a credit check |
| How long is it valid? | Often 60 to 90 days, depending on the lender |
| Does it affect your credit? | It involves a credit inquiry, which can lower your score slightly |
| Is it a loan commitment? | No. The final loan still requires an appraisal, underwriting and a property |
| Where can we help? | NJ, NY, FL, PA, IN, CA and TX |
| Get started | 516-327-6000 · sunnyjain@amcaps.com |
What Is the Difference Between Pre-Qualification and Pre Approval?
A pre-qualification is a fast process based on the information you provide. A pre-approval is based on verified documents and a credit check. Pre-approvals hold much more weight with sellers and agents.
| Feature | Pre-qualification | Pre approval |
|---|---|---|
| Based on | Information you report | Verified documents and a credit check |
| Credit inquiry | Often none | Yes |
| Time needed | Minutes | Usually a few days once documents are in |
| Strength with sellers | Weak | Strong |
| Best for | Early budget planning | Making offers on homes |
How Do You Get Pre-Approved for a Mortgage?
To get pre approved for a mortgage you will need to pick a lender/broker, complete an application, and provide any documents. We can help compare different programs with a broker to ensure the correct pre approval letter is provided.
- Talk to us: share your goals, budget and timeline.
- Submit documents: upload the items in the checklist below.
- Credit check: you authorize a review of your credit report.
- We review and compare options: we match you to programs that fit your profile.
- Receive your pre approval letter: use it to make offers with confidence.
What Documents Do You Need for Mortgage Pre Approval?
Most borrowers need to provide the following, though requirements vary by program and lender.
- Government-issued photo ID and Social Security number
- Pay stubs from the last 30 days and W-2s from the last two years
- Federal tax returns for the last two years
- Recent bank and asset statements, usually two months
- A list of your monthly debts and any rental history
- If self-employed: business and personal returns, a profit-and-loss statement, or 12 to 24 months of bank statements for alternative documentation loans
- For VA loans: your Certificate of Eligibility, which we can help you request
What Do Lenders Look at for Mortgage Pre Approval?
Lenders review four things: your credit, your income, your debts and your assets. Together they determine how much you can borrow and which programs you qualify for.
- Credit: FHA guidelines allow 3.5% down with a 580 score, and our FHA Advantage Program lists scores as low as 550. Conventional loans commonly look for 620 or higher.
- Income: steady, documented income from employment, self-employment or other qualifying sources.
- Debt-to-income ratio: your monthly debt payments, including the new mortgage, compared with your gross monthly income. Many lenders look for 43% to 45% or lower, though some programs allow more.
- Assets: funds for your down payment, closing costs and, for some loans, cash reserves.
How Long Does Mortgage Pre Approval Take?
Depending on how quickly you can provide documents, a mortgage pre-approval can often take a few business days. This will depend on how quickly you provide documents and how complex your income is. Self employed and alternative documentation can take longer to complete.
How Long Is a Mortgage Pre Approval Good For?
Most pre approvals will last between 60-90 days. If your pre-approval has expired and you haven’t found a home yet your lender can usually update your pre-approval with new documents and a new credit check. Your pre-approval can change if your income, debts or credit change.
Does Mortgage Pre Approval Hurt Your Credit Score?
As there will be a credit check carried out this can reduce your credit score slightly. However most credit scoring systems will only count multiple mortgage enquiries within a short period of time (often 14-45 days depending on the system) as one enquiry.
What Should You Avoid After Getting Pre-Approved?
Avoid anything that will change the figures that were looked at by your lender as they will double check your finances.
- Don’t open new credit cards or take out new loans, including car financing.
- Don’t change jobs or become self-employed without talking to us first.
- Don’t make large unexplained deposits or move money between accounts.
- Don’t co-sign for anyone else’s loan.
- Keep paying all bills on time.
Can You Get Pre-Approved With Low Credit or Self-Employed Income?
Often yes! We have more flexible credit options with FHA loans. Our non-QM programs allow self employed borrowers to qualify using bank statements, 1099s and profit and loss statements. A pre-approval will show you what programs you qualify for. Find out more about our FHA and VA and non-QM loan programs.
Where Can You Get a Mortgage Pre Approval From Us?
We provide mortgage pre approvals for buyers in New Jersey, New York, Florida, Pennsylvania, Indiana, California and Texas. For state-specific details, see our pages for a mortgage broker in New Jersey, a mortgage broker in New York and a mortgage broker in Florida.
Who Is My American Capital?
My American Capital is the online presence of American Capital Mortgage Inc. who are a licensed mortgage broker based in Orange, New Jersey. Our founder and CEO Sunny Jain (NMLS ID 13710) has been in the mortgage industry since 1996. Our loan officers can be verified via NMLS Consumer Access.
FAQs:
Costs vary by lender. Ask what fees apply, if any, before you apply, and compare each lender’s Loan Estimate once you choose a loan.
No. Pre approval is an estimate based on the documents reviewed. Your final loan still depends on the property, the appraisal and final underwriting.
Sometimes. VA loans often require no down payment for eligible veterans and service members, and some assistance programs can cover part of the down payment. Most other programs require at least 3% to 3.5% down.
It depends on the program. FHA guidelines allow 3.5% down with a 580 score, our FHA Advantage Program lists scores as low as 550, and conventional loans commonly look for 620 or higher.
Yes. Pre approval shows you your budget and lets you make offers that sellers take seriously, which is especially important in competitive markets.
Yes. Credit scoring models typically count multiple mortgage inquiries within a short window as one, so you can compare options without repeated damage to your score.
You shop for a home, make an offer and sign a contract. Then you choose your loan program, the lender orders an appraisal, underwriting reviews your file, and you move toward closing.
Yes. We review self-employed borrowers using tax returns or alternative documentation such as 12 to 24 months of bank statements, 1099s or profit-and-loss statements.
Ready to Get Started?
Get your free quote today Contact us or Call: 516-327-6000
Email: sunnyjain@amcaps.com
Address: 439 Main Street, Suite 102, Orange, NJ 07050