What You Need Before a Mortgage Preapproval

What a lender will ask for before preapproval

A mortgage preapproval requires you to hand over financial documents so a lender can verify your income, debts, and assets. The lender then tells you the loan amount they would be willing to give you, based on what they see. This is not a commitment from them — they can still say no when you buy an actual house — but it does tell you what price range to look at.

Most lenders ask for the same core documents. You will need recent pay stubs (usually the last two months), W-2 forms from the past two years, and a recent tax return. If you are self-employed, expect to provide two years of tax returns and possibly a profit-and-loss statement. The lender also wants to see bank statements — typically the last two months — to confirm you have the down payment and closing costs saved.

You will also need to list your debts: credit cards, car loans, student loans, and any other monthly obligations. The lender pulls your credit report themselves, but they want your own list to cross-check. If you have changed jobs recently, bring an offer letter or a note from your employer confirming your start date and salary.

Key Takeaways

• Bring recent pay stubs, W-2s, and tax returns so the lender can verify your income has been stable.
• Bank statements for the last two months prove you have saved your down payment and can cover closing costs.
• List all your debts — the lender uses this to calculate how much monthly payment you can afford.
• The preapproval letter is valid for 60 to 90 days, so time your request close to when you plan to make an offer.
• A preapproval does not lock in your interest rate unless you pay for a rate lock, which costs money and expires after a set period.

Documents to gather before you call

Start by collecting your pay stubs and tax returns. If you have them in a folder already, you are ahead. If not, log into your employer's payroll system or ask HR to email them. Tax returns are usually in your email or in a file at home — if you filed electronically, you can download them from the IRS website using your login.

Next, log into your bank and download statements for the last two months. Most banks let you export these as PDFs. Do the same for any other accounts where you hold money — savings accounts, money market accounts, investment accounts. The lender wants to see the full picture of what you have.

Pull your credit report from annualcreditreport.com, which is the only free site authorized by the federal government. This is not the same as your credit score — it is the actual report the lender will see. Check it for errors or accounts you do not recognize. If you spot something wrong, you can dispute it, but this takes time, so do it now if you plan to apply soon.

What to do about recent job changes or gaps

If you changed jobs in the last two years, bring documentation from your new employer: an offer letter, a contract, or a recent pay stub with the new company name. Most lenders want to see that you have been in your current job for at least two months, though some will go back further if your new role is in the same field.

If you have a gap in employment, be ready to explain it. A lender will ask. If you were laid off and found a new job, bring the offer letter and your first pay stub from the new employer. If you took time off to care for family or for another reason, write a brief note explaining the gap and when you returned to work. The lender is checking whether your income is stable going forward, not judging your past.

If you are currently unemployed but have a job offer starting soon, some lenders will work with you if the start date is within 30 days. You will need the written offer letter with the salary and start date. Other lenders will not move forward until you have actually started and have at least one pay stub from the new employer.

How to handle debt and credit issues

List every monthly debt obligation you have: credit card minimum payments, car loans, student loans, personal loans, child support, alimony, and any other regular payment. The lender calculates your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. Most lenders want this ratio to be 43 percent or lower, though some will go up to 50 percent.

If you have high credit card balances, paying them down before you apply can improve your ratio and your credit score. Even paying down one card to zero can help. Do not close the account after you pay it off — closing it can actually hurt your score by reducing your available credit.

If you have late payments or collections on your credit report, the lender will ask about them. Be honest and explain what happened. A single late payment from years ago is less of a problem than recent ones. Collections accounts are more serious, but some lenders will still work with you if the account is old or if you have paid it off. Ask the lender directly what their policy is before you spend time gathering documents.

Timing your preapproval request

A preapproval letter is usually valid for 60 to 90 days. If you are not ready to start house hunting yet, wait to request one. Applying too early means your letter will expire before you find a house and make an offer. If you are serious about buying within the next month or two, now is the time to call lenders.

When you call, ask how long the preapproval is valid for and whether they charge a fee. Most do not charge for a preapproval, but some do. Also ask whether they will lock in your interest rate as part of the preapproval. Rate locks usually cost money and expire after 30, 45, or 60 days. If rates are rising and you want to protect yourself, a lock might be worth it. If rates are falling, you probably do not want to pay for a lock.

After you receive your preapproval letter, do not make large purchases or open new credit accounts. A new car loan or credit card will change your debt-to-income ratio and could affect the lender's decision when you actually apply for the mortgage. Wait until after you close on the house.

What happens after you get preapproved

The preapproval letter tells you the maximum loan amount a lender will give you, but it does not mean you should borrow that much. The lender's calculation is based on your income and debts, not on what you can actually afford to pay each month while covering property taxes, insurance, utilities, and everything else.

Use the preapproval letter as a starting point. Look at houses in the range the lender approved, but also think about your own budget. Can you afford the monthly payment plus taxes and insurance? Do you have money left over for maintenance, emergencies, and life? A preapproval tells you what a lender thinks is safe. Your own budget tells you what is actually safe for you.

When you find a house and make an offer, you will move into the formal mortgage process. The lender will order an appraisal, verify your employment again, and pull your credit report one more time. They may ask for updated bank statements or pay stubs. This is called the underwriting phase, and it is more thorough than the preapproval. The preapproval does not may provide final approval, but it does mean the lender has already seen your finances and found them acceptable in principle.

Frequently Asked Questions

Do I need to be preapproved before I look at houses?

No, but it helps. You can look at houses anytime. However, when you make an offer, most sellers will want to see a preapproval letter before they take you seriously. It signals that you have money and that a lender has already vetted your finances. Without it, your offer is weaker than one from a preapproved buyer.

Will the preapproval hurt my credit score?

A preapproval involves a hard credit inquiry, which can lower your score by a few points. The impact is temporary and small. Multiple inquiries from different lenders within a short window (usually 14 days) count as a single inquiry for scoring purposes, so if you are shopping around, do it quickly.

Can I get preapproved with bad credit?

It depends on how bad. Most conventional lenders want a credit score of at least 620, though some go lower. FHA loans are more flexible and may work with scores in the 500s. If your score is low, ask lenders what their minimum is before you gather documents. You might also ask what you can do to improve your chances.

What if my income is irregular or seasonal?

Lenders typically average your income over two years if it varies. If you are self-employed or work on commission, bring two years of tax returns and bank statements. Some lenders will average your income; others will use a lower figure if your recent income is down. Be upfront about how your income works so the lender can explain their process.

Does preapproval mean the interest rate is locked in?

Not unless you pay for a rate lock. A preapproval letter usually includes an estimated rate for information only. If you want to lock in that rate, you have to ask and usually pay a fee. The lock lasts for a set period — typically 30 to 60 days — and if rates drop, you cannot take advantage of the lower rate.