What Is Mortgage Pre-Approval?
Mortgage pre-approval is a lender's conditional commitment to lend you a specified amount based on a review of your credit, income, assets, and employment history. A pre-approval letter tells sellers you are a qualified, serious buyer and is substantially stronger than pre-qualification.
Pre-Approval vs. Pre-Qualification
Pre-qualification is an informal estimate based on information you provide verbally, without verification. Pre-approval involves a formal application, a hard credit inquiry, and full documentation review -- W-2s, pay stubs, tax returns, and bank statements. Because pre-approval involves actual verification, it carries substantially more weight with sellers.
Pre-Approval Example
On $7,500/mo gross income with $500/mo existing debt and a 43% max DTI, the maximum total debt allowed is $3,225/mo, leaving up to $2,725/mo for a new mortgage payment -- a pre-approval letter might state up to roughly $420,000 at 6.75%/30yr. That figure is the lender's ceiling, not necessarily what's comfortable once other spending and savings goals are factored in.
How Long Does Pre-Approval Last?
Pre-approval letters are typically valid for 60 to 90 days. Multiple mortgage applications within a 45-day window count as a single credit inquiry under FICO rules, so shopping for the best rate does not materially harm your score.
Pre-Approval Is Not a Loan Commitment
Pre-approval is conditional, not a final loan approval. Final approval requires a specific property appraisal, title search, and final underwriting review. Approval can be revoked if your financial situation changes materially before closing -- for example, if you take on new debt or lose your job.
Common Pre-Approval Mistakes
Shopping at the top of your pre-approval amount. The ceiling is based on DTI math, not your actual comfort level.
Making a big financial change before closing. New debt, a new job, or a large unexplained deposit can all jeopardize final approval.