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Getting pre-approved
The question: What does a pre-approval mean for my offer?
For: Buyers getting ready to make an offer
The short version
A pre-approval is our written statement of the loan you qualify for. It shows sellers that your offer is serious, and it shows you your budget before you choose a home.
Lenders use "pre-qualified" and "pre-approved" in different ways. Our letter comes after we read your pay stubs, W-2s or tax returns, and bank statements, work out your income, debts and cash to close, and talk through your credit in detail.
A credit report is not always part of a pre-approval. Reports cost well over $100 each now, and a fresh one is often needed once you are under contract, so pulling one only to write a letter can spend that money twice. We ask about your scores, past late payments, collections and anything else on your report. Be upfront with us: the report will show it, and we would rather plan around it now. When something needs a closer look, we order the report sooner.
A pre-approval is not a loan commitment. The home still has to appraise and pass the lender's review, and your finances need to stay steady until closing.
When we do order credit, it is one tri-merge report (all three bureaus in one). We price many lenders with it and submit your file to the best fit. If you also apply elsewhere, mortgage credit checks within 14 to 45 days, depending on the scoring model, count as one inquiry.
In Southwest Colorado, the property itself can change the loan. A USDA pre-approval assumes an eligible address, and manufactured homes, large parcels, cisterns or hauled water can narrow the lenders who will make the loan. Let us know what kind of property you are looking for, so your letter fits the homes you will actually tour.
Go deeper
What to gather
- Pay stubs covering the last 30 days
- W-2s for the last two years, plus any 1099s
- Tax returns, usually the last one or two years, if you are self-employed or have rental income. We tell you exactly which years and forms your file needs
- The last two months of statements for every bank, investment and retirement account you will use, every page
- A photo ID
- A short note on any large deposit that is not payroll
- Veterans: we can usually obtain your Certificate of Eligibility online, and a DD-214 helps
Sending everything at once, with every page of each statement, keeps a file moving.
Pre-qualified, pre-approved, approved
Pre-qualified often means an estimate from what you told the lender, with nothing verified. Pre-approved should mean someone read your documents and worked out your income, debts and cash to close. What was checked matters more than the label, so ask what stands behind a letter.
Ours rests on your documents and a full conversation about your credit, and on a credit report and an automated underwriting approval when your file calls for them. Either way, the report is ordered before your loan moves forward, and nothing on it should surprise either of us.
Approved comes later, once there is a specific home. The underwriter reviews the contract, appraisal and title, then lists any conditions. When those are met, you are clear to close.
Neither letter is a guarantee. Both rest on assumptions that must hold until closing.
What a good letter shows
A useful letter names the loan type, the price or loan amount, and how long it is valid.
We write a letter for each offer's price rather than your maximum. That way, the seller sees that you qualify for this home without seeing how much higher you could go.
Letters and the documents behind them age. Credit reports, pay stubs and statements each expire after a set time, so if your search runs longer than a couple of months, expect to send updates and receive a new letter.