Why You Should Get Pre-Approved for a Mortgage in 2025

Getting preapproved for a mortgage tells you how much you can borrow, what your interest rate might be, and how much you can expect to pay each month based on your income, credit score, debt-to-income ratio, and assets. This personalized assessment is different from generic online calculators because it looks at your actual financial documents, like W-2s, pay stubs, tax returns, and bank statements. This gives sellers confidence that you're a serious buyer who can close the deal. Getting preapproval early saves you time by keeping you from looking at homes you can't afford and gives you more power in negotiations in competitive markets where multiple offers are common.

Key Takeaways

• Preapproval shows sellers that you are a serious buyer by showing that a lender looked over your finances and tentatively agreed to lend you certain amounts. This makes your offers more competitive and gives sellers peace of mind that the deal will go through.
• Before you start looking for a house, make sure you know your real budget. This will keep you from getting emotionally attached to houses that are out of your price range and help you focus your search on houses that are in your price range.
• By reviewing documents early, lenders can speed up the closing process because they have already looked at your financial information. This cuts down on delays and speeds up the time it takes to go from accepting an offer to closing.
• Finds qualification problems early so you have time to fix credit problems, missing income documentation, or debt issues before you buy your dream home.
• The process needs a lot of financial paperwork, like two years of tax returns, recent pay stubs, W-2s, bank statements for all accounts, and full lists of debts for student loans, credit cards, and car payments.

Buying a home is an exciting journey, and the right preparation can help you avoid surprises — like realizing a home is out of reach after you've fallen in love with it.

That's where mortgage preapproval comes in. For buyers who aren't familiar with the importance of preapproval, this part of buying a home might seem like an extra step. But mortgage preapproval gives you a clear picture of your budget and strengthens your offer in a competitive market. It can even help you stand out from other buyers.

Let's go over the benefits of being a preapproved buyer and what you need to get started.

What is preapproval?

Mortgage preapproval is when a lender reviews your finances to determine how much you may be eligible to borrow, what your interest rate might be, and what your monthly payment would look like. Unlike online mortgage calculators, it's personalized to you, making it a more reliable indicator of your home-buying budget.

To receive a preapproval, you'll need to fill out a mortgage loan application and submit your financial information. The lender will review your income, debt, credit score, and other factors, and then provide you with a mortgage preapproval letter showing what you've been preapproved to borrow.

Understanding the importance of preapproval

One of the most common first-time home buyer questions is, "Should I get preapproved for a mortgage?" The answer is often yes.

Securing a mortgage preapproval means you've passed a lender's first look. Your financial strength and buying power have been preapproved by a mortgage lender, giving you — and sellers — greater confidence in what you can afford. You'll know you're in good shape to move forward with an offer on a home because a lender has examined your finances.

A mortgage preapproval is also a signal to sellers that you're serious about a home purchase and ready to commit. When sellers see you have a mortgage preapproval in hand, they know you're prepared to buy and can feel comfortable that the deal should move ahead smoothly.

Benefits of being a preapproved buyer

One of the most common first-time home buyer questions is, "Should I get preapproved for a mortgage?" The answer is often yes.

Securing a mortgage preapproval means you've passed a lender's first look. Your financial strength and buying power have been preapproved by a mortgage lender, giving you — and sellers — greater confidence in what you can afford. You'll know you're in good shape to move forward with an offer on a home because a lender has examined your finances.

A mortgage preapproval is also a signal to sellers that you're serious about a home purchase and ready to commit. When sellers see you have a mortgage preapproval in hand, they know you're prepared to buy and can feel comfortable that the deal should move ahead smoothly.

Taking this important step can save you a lot of headaches and heartbreaks down the road.

Benefits of being a preapproved buyer

Why get preapproved for a mortgage? With a preapproval in hand, you can:

• Know what you can afford: A preapproval tells you what price range to target. It also shows you what you can expect your mortgage payments to be.
• Pinpoint problems early: Because lenders review your information when you apply, any qualification issues they may uncover can be dealt with early in the process.
• Show your real estate agent you're prepared: Being preapproved for a mortgage lets your agent know you've done your homework and are ready to buy.
• Reassure sellers you can make it to the finish line: Sellers want to know ahead of time that the deal is going to work. A preapproval shows them you've already spoken with a lender and have the purchasing power to buy.
• Speed up closing: Preapprovals can also streamline the loan process because the lender has already received and reviewed your financial documents.

How the preapproval process works

Lenders want to know that you have the means to repay a loan before they commit. That's why preapprovals are useful: They show that a lender has already reviewed your finances and has tentatively agreed to lend you up to a certain amount (provided you meet certain conditions). Here's how it works:

1. Choose a lender: Look for a lender with strong mortgage industry experience, quick approvals, and highly rated customer service.
2. Fill out and submit an application: Provide details such as your name, address, date of birth, Social Security number, employer, income, assets, and other info.
3. Upload documents: Submit paperwork that proves the information you've provided. Lenders typically require proof of income (pay stubs, tax returns), credit history, bank statements, and details about any debts.
4. Receive a preapproval letter: If everything checks out, the lender will send you a mortgage preapproval letter, which you can use as you shop for homes.

Documents you'll need

You may be able to speed up the preapproval process by gathering these documents ahead of time:

• W-2s
• Current pay stubs
• Tax returns (usually for the last two years)
• Bank statements for each of your accounts (usually for the last two months)
• List of debts, such as student loans, personal loans, credit cards, and car payments

You may also need a driver's license or other proof of identity.

Your lender's response

Once you've submitted your documentation, the process usually moves swiftly. Your lender will either:

1. Preapprove you
2. Preapprove you with conditions
3. Deny your application

Getting preapproved is a positive step. Once you have your preapproval and find the home you want, your lender will update your file with the property address and schedule an appraisal.

Being preapproved with conditions is still encouraging. It means there are minor tasks left, such as providing missing documents or answering additional questions, to achieve full preapproval.

If you're denied, your lender will explain the reasons clearly. You may need to work on improving your credit score or addressing income or banking issues before reapplying.

Get preapproved for a mortgage today

A mortgage preapproval gives you a clear budget and a competitive edge. Get started today by contacting the Loan Experts at AmeriSave for additional home-buying tips and to learn more about your preapproval options.