Mortgage Pre-Approval
A mortgage pre-approval is a conditional commitment from a lender stating how much they are willing to lend you, based on verified income, assets, credit, and debt. Pre-approval gives sellers confidence you can close and is effectively required in competitive housing markets.
Pre-approval differs from pre-qualification: pre-qualification is a quick estimate based on self-reported data, while pre-approval involves a hard credit pull and verification of income (pay stubs, W-2s, tax returns), assets (bank statements), and employment. A pre-approval letter carries significant weight with sellers.
Pre-approvals are typically valid for 60–90 days. Getting pre-approved before house hunting helps you set a realistic budget, moves quickly when you find a home, and gives your offer a stronger competitive position.
Pre-approval is not a guarantee of a loan — final approval requires a satisfactory appraisal and title search, and your financial situation must remain stable. Major changes (new debt, job change, large purchases) between pre-approval and closing can disqualify you.
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Open calculator →Related terms
- Debt-to-Income Ratio (DTI)
- The debt-to-income (DTI) ratio is your monthly debt payments divided by your gross monthly income, expressed as a percentage. Most lenders require a DTI below 43% to qualify for a mortgage.
- Credit Score
- A credit score is a three-digit number (typically 300–850) that summarises your credit history. Higher scores mean lower borrowing costs — a higher score on a mortgage can save tens of thousands of dollars over the loan's life.
- Down Payment
- A down payment is the upfront cash you pay toward a home purchase. It equals the purchase price minus the loan amount. Most conventional loans require 3–20%; putting 20% down avoids private mortgage insurance (PMI).
- Closing Costs
- Closing costs are fees paid at the end of a real estate transaction to complete the mortgage. They typically range from 2–5% of the loan amount and include lender fees, title insurance, appraisal, and prepaid items.