What's a pre-approval?

A pre-approval is a lender deciding that, based on the financial information you provide, you’re a good candidate for a mortgage. In the pre-approval process, you usually get an estimate of your loan amount, interest rate, and what your monthly payment could be. This process can vary from lender to lender, and some lenders will call this a "pre-approval" or a "pre-qualification."

Why Getting Pre-Approved Is Important

What Lenders Review

Mortgage lenders typically look at three criteria when deciding on how much you can borrow: your assets, your income, and your credit.  

Your Assets

Assets are items you own that could be turned into cash should the need arise. They include things like checking and savings accounts, stocks, real estate, personal property, and more. Lenders review your assets to make sure you have some money set aside to make your mortgage payments after closing.

Your Income

Lenders review your income to ensure you can afford a monthly mortgage payment. They'll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn't offset your income too much. Typically, a mortgage company will want to see you have a DTI below 50%.

Your Credit

Having good credit can help you qualify for a better interest rate because you've shown you're a responsible borrower. Some mortgage lenders have minimum FICO® score requirements.  

Will getting pre-approved affect my credit score?

Getting pre-approved for a mortgage involves pulling your credit report, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.

Steps to Getting a Pre-Approval

Every mortgage lender has its own process for getting pre-approved. At Arcstone Financial, we use have a dedicated team that handles your pre-approvals quickly and efficiently.  

"To Be Determined" Pre-Approved

With a TBD, you can strengthen your bargaining position before you make an offer. Verifying your finances will help you make a stronger offer because it shows the seller you are able to buy the home. All your income and assets are reviewed by an Underwriter, and your TBD approval allows you to show with more confidence knowing the only things from finding your home are an appraisal and an accepted offer!

How long is a pre-approval letter good for?

Pre-approval letters generally expire after 90 days, though that can vary based on your type of loan. If you haven't made an offer within 90 days of getting an approval letter, you should renew your approval before making an offer on a house.

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