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Mortgage Loan Pre-approval: FAQs

Congratulations on starting your homebuying journey! Buying a home is an exciting, sometimes nerve-wracking, process. Don’t worry, you’ve got this, and we’re here to help. Whether you’re just beginning to think about buying a home or maybe you’ve already begun house shopping, getting pre-approved is an important step in the homebuying process. If you’re a first-time homebuyer, you may have some questions, so let’s start with the basics.

• What is a mortgage loan pre-approval?
  Essentially, it is a stamp of approval from a bank after they’ve reviewed your credit history, your income and employment history, and your bank statements. If your pre-approval application is accepted, it means, based on everything the bank saw, they are confident that you could repay it if they gave you a mortgage loan.

• How do I get pre-approved for a mortgage loan?
  Our pre-approval process starts by requesting your last two years of W2 forms or tax returns, your most current pay stub, bank statements covering the past two months, and your ID. Once our loan officer has all this information, they’ll begin processing your application. But, as for actually getting pre-approved, the requirements and criteria will depend on the mortgage lender and the type of loan you’re wanting to apply for. For tips on getting pre-approved make sure to check out our blog on that exact topic. (link to tips for getting pre-approved blog)

• What’s the difference between pre-approved and pre-qualified?
  Pre-qualification often refers to a less in-depth review of your finances to estimate what amount you are likely to be approved for when applying for a mortgage loan. When applying for pre-qualification, the lender may review your annual income, what monthly payments you have, and how much have saved up. Applying for pre-approval requires more of your financial information, such as tax documents, paystubs, bank statements, etc. Pre-approval will usually take longer than pre-qualification (DeNicola, 2023). You can always ask your mortgage lender if they offer both, and if so, what the difference in their process is. For example, our loan department here at Citizens Federal only offers pre-approvals.

• How long does pre-approval take?
  Our pre-approval applications are processed within 3-5 business days of being submitted. We suggest asking your loan officer to confirm how long it will take for your application to be processed, as it can vary depending on your lender.

• How long is a pre-approval good for?
  Our pre-approvals are good for 30 days. The 30-day window is typical throughout the banking industry. Still, it’s a good idea to ask your loan officer to be sure.

• How does my credit score impact my pre-approval?
  According to the Consumer Financial Protection Bureau (2023), your credit score is “a prediction of your credit behavior” (para.1). What does that mean? Essentially, your credit score is a rating of how likely you are to repay a loan. Your score is based on different factors, such as payment history, amount owed, new credit, length of credit history, and credit mix (Langager, 2023). Credit scores usually range from 300 to 850. They can feel confusing, but think of it this way: Your credit score is trying to answer the question, “On a scale of ____ to ____, how likely are you to repay your loan?” The idea is the same regardless of whether it’s a scale of 1 to 10 or 300 to 850. The higher the score, the more confidence there is that you’ll repay your loan. Your credit score isn’t the only thing considered when deciding whether to approve you for a loan. But it usually is a pretty good indicator of what your loan officer will find once they start digging deeper.

• Can you get pre-approved for a mortgage loan without a hard credit inquiry?
  Yes! At Citizens Federal we conduct a soft credit inquiry when processing your pre-approval application. This gives us the information we need for pre-approval while minimizing the amount of spam calls you’ll receive from other mortgage companies at this point in the process. Eventually, we will perform a hard credit inquiry but typically that will be later in your homebuying process once you have found a home that you want to purchase and are ready to move forward with a mortgage loan.

• How do I avoid getting spam calls after applying for pre-approval?
  Often, after applying for pre-approval, you might begin receiving unsolicited phone calls, emails, or mail from other mortgage companies with competing loan offers. First, it’s important to us that you know we did not sell or share your information with these other mortgage companies. Second, these mortgage companies are taking advantage of a federal law that lets them identify potential customers for their products and then advertise to them. Third, you can opt out of these unsolicited offers. For opting out to be effective, you’ll want to do it well before applying for your pre-approval. Your opt-out request will be processed within five days, but it may take up to 60 days before pre-screened offers stop coming. For more information and instructions on opting out, check out our downloadable resource that covers this topic. (Opt-Out letter pdf link)

• Does pre-approval guarantee a mortgage loan?
  No, pre-approval does not guarantee a mortgage loan. As we said at the start, a pre-approval means, based on everything the bank saw, they’re confident that if they gave you a mortgage loan, you could repay it.

• What do I do once I’m pre-approved?
  Once you’re pre-approved, your next steps will depend on where you’re at in your homebuying journey. Now you can confidently begin or continue shopping for homes. Being pre-approved is a significant step because it provides a clear understanding of your budget and increases your negotiating power when you are ready to make an offer on a home. It can be advantageous for a seller to know you already have a lender lined up who is confident they can approve you for a loan.

Now that you have a basic understanding of what a mortgage loan pre-approval is and how it works, you can take your next steps towards buying a home with confidence. If you’re interested in tips for getting pre-approved or have questions about mortgage loans or the homebuying process, check out our blogs linked below or our downloadable resources available on our blog page (blog page link and buttons for relevant blogs).

This blog is for informational purposes only. All loans are subject to credit approval.

Reference List
DeNicola, L. (2023, February 15). Prequalified vs. Preapproved: What's the Difference? Experian.com. Retrieved January 18, 2024, from https://www.experian.com/blogs/ask-experian/pre-approved-vs-pre-qualified-whats-the-difference/#:~:text=Prequalification%20tends%20to%20refer%20to,offer%20based%20on%20a%20preapproval 

Consumer Financial Protection Bureau (2023, August 28). What is a credit score? Consumerfinance.gov. Retrieved January 18, 2024, from https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/#:~:text=A%20credit%20score%20is%20a,information%20from%20your%20credit%20reports

Langager, C. (2023, March 31). How is My Credit Score Calculated? Investopedia.com. Retrieved January 18, 2024, from https://www.investopedia.com/ask/answers/05/creditscorecalculation.asp#:~:text=A%20FICO%20credit%20score%20is%20calculated%20based%20on%20five%20factors,can%20temporarily%20lower%20your%20score