What Preapproval Actually Means
Preapproval is a lender's written statement that they will loan you up to a specific dollar amount, based on information you've already provided about your income, debts, and credit. It is not a promise to lend — it's a conditional offer that expires (usually in 30 to 120 days) and depends on the property you eventually choose and a final verification of your finances.
Preapproval is different from prequalification, which is an informal estimate a lender gives over the phone or online without verifying anything. Preapproval requires documentation: pay stubs, tax returns, bank statements, and a credit check. A lender pulls your actual credit report and runs the numbers through their underwriting system.
The main reason to get preapproved before house hunting is that real estate agents and sellers take it seriously. When you make an offer, you can include the preapproval letter as proof you can actually close the deal. Without it, your offer competes against offers from preapproved buyers, and sellers will often accept those first.
Key Takeaways
- Preapproval requires you to submit pay stubs, tax returns, bank statements, and authorize a credit check — it takes one to three business days to complete.
- The preapproval letter states a maximum loan amount and is valid for 30 to 120 days, depending on the lender.
- You can get preapproved from multiple lenders at once without damaging your credit score, as long as you do it within 14 days.
- Preapproval does not lock in your interest rate unless you pay for a rate lock, which typically costs 0.25 to 0.5 percent of the loan amount.
- After preapproval, you still need a final underwriting review once you have a signed purchase agreement and the lender has appraised the property.
Gather Your Financial Documents Before You Contact a Lender
Lenders will ask for the same documents regardless of which bank or mortgage company you choose. Have these ready before you call or fill out an online process: two recent pay stubs (usually the last 30 days), two years of federal tax returns (the full return, not just the summary), two recent bank statements (checking and savings), and a list of any debts you carry (credit cards, car loans, student loans, medical debt).
If you are self-employed or your income includes bonuses or commissions, bring two years of tax returns and a current profit-and-loss statement. If you have changed jobs in the past two years, bring an offer letter from your current employer. If you have a co-borrower (a spouse or partner who will be on the loan), gather the same documents for them.
You do not need to bring a down payment yet — preapproval only checks whether you have the income and credit to borrow. However, lenders will ask how much you plan to put down, because that affects the loan amount they will offer.
Choose Lenders and Submit Your process
You can explore for preapproval at a bank where you already have an account, a credit union, a mortgage broker, or an online lender. Each has different fees and interest rates, so it makes sense to compare at least two or three. You can submit applications to multiple lenders within a 14-day window without multiple credit checks damaging your score — credit bureaus treat multiple inquiries within that window as a single shopping trip.
Most lenders now let you start the process online and upload documents directly. You will enter your income, employment history, existing debts, and the approximate price range of the home you are looking for. The lender will ask for permission to pull your credit report. This is a hard inquiry and will show on your credit report, but as noted above, multiple hard inquiries within 14 days count as one.
After you submit, a loan officer or automated system will review your process. If anything is unclear or missing, they will contact you within one business day. Be prepared to explain any large deposits, gaps in employment, or late payments on your credit report.
What Happens During Underwriting Review
Underwriting is the process where a lender's team verifies everything you told them. They will contact your employer to confirm you work there and earn what you said. They will review your bank statements to make sure the money is actually there and to check for any red flags (like large unexplained transfers). They will pull your credit report and look at your payment history.
The underwriter may ask follow-up questions: Why did you have a late payment in 2021? Where did that $10,000 deposit come from last month? Why did you change jobs? Have honest, straightforward answers ready. Most questions are routine; lenders just need to document that they did their due diligence.
This review usually takes one to three business days. Some lenders offer "same-day preapproval" or "24-hour preapproval," but this typically means they have already done a preliminary review and are waiting only for you to submit final documents.
Understand What the Preapproval Letter Says
When the lender approves you, they will send a preapproval letter. This letter states three key things: the maximum loan amount they will lend you, the interest rate (if you have locked it in), and the expiration date. Read it carefully.
The maximum loan amount is based on your income and debts using a debt-to-income ratio — most lenders will not lend more than 43 percent of your gross monthly income (before taxes) when all your debts are added together. So if you earn $5,000 a month, your total monthly debt payments (including the new mortgage) cannot exceed $2,150.
The interest rate on the letter may be a "sample rate" or an actual locked rate. If it is a sample rate, the actual rate you receive will depend on market conditions and your final loan terms. If you want to lock in the rate shown, you usually have to pay a rate lock fee, which ranges from 0.25 to 0.5 percent of the loan amount. Ask the lender whether the rate is locked or a sample before you leave the office or end the call.
Know What Preapproval Does Not may provide
Preapproval is conditional. The lender has approved you based on the information you provided, but several things can change that approval before closing. If you miss a payment on a credit card or car loan between preapproval and closing, your credit score drops and the lender may withdraw the offer. If you change jobs or lose income, you must tell the lender when ready.
If you explore for new credit — a car loan, a credit card, even a store card — the lender will find out during final underwriting and may reduce the amount they will lend you. Do not make large purchases or take on new debt after preapproval.
The property itself also matters. Once you have a signed purchase agreement, the lender will order an appraisal. If the home appraises for less than the purchase price, the lender may reduce your loan amount. If the home inspection reveals major problems, the lender may require repairs before closing.
Decide Whether to Lock Your Interest Rate
Interest rates change daily. When you receive preapproval, the lender will quote you a rate, but that rate is usually only good for 15 to 30 days. If you want to may provide that rate, you can pay to lock it in. A rate lock typically costs 0.25 to 0.5 percent of the loan amount (so $1,250 to $2,500 on a $500,000 loan) and is usually added to your closing costs.
Whether to lock depends on market conditions and how quickly you plan to make an offer. If interest rates are rising and you plan to make an offer within two weeks, locking makes sense. If rates are falling or you are still house hunting, waiting may save you money. Ask your lender what the current rate is, what the rate lock fee is, and how long the lock lasts.
You can also ask for a "float-down" option, which lets you lock in a lower rate if rates drop before closing. This costs more than a standard lock but protects you if the market moves in your favor.
What Happens After You Find a Home
Once you have found a home and made an offer, you will submit the purchase agreement to your lender. This triggers the final underwriting process. The lender will order an appraisal (which you usually pay for, around $400 to $600), and an appraiser will visit the property and compare it to similar homes in the area.
The lender will also do a final verification of your employment, income, and credit. They will pull your credit report again to make sure nothing has changed. If everything matches what you told them during preapproval, they will issue a clear-to-close letter, which means you are approved to proceed to closing.
This final review usually takes 7 to 10 business days. If the appraisal comes in lower than the purchase price, or if the underwriter finds something unexpected, this can delay closing or require you to renegotiate the purchase price.
Frequently Asked Questions
Does preapproval hurt my credit score?
A hard inquiry (the credit check) will lower your score by a few points, but the impact is temporary and small — usually 5 to 10 points. Multiple hard inquiries within 14 days count as one inquiry, so shopping around with several lenders does not compound the damage. Your score will recover within a few months.
Can I get preapproved if I have bad credit?
It depends on how bad. Most lenders require a credit score of at least 580 to 620, though some will go lower. If your score is below 620, you may still find lenders, but you will pay a higher interest rate. Some lenders specialize in borrowers with lower scores. Getting preapproved will tell you what rate you can actually get.
What if my preapproval expires before I find a home?
Preapproval letters expire because interest rates and your financial situation can change. If yours expires, contact your lender and ask for an update. They will pull your credit again and re-verify your income, but this is usually faster than the original preapproval. You may get a different rate if market conditions have shifted.
Do I have to use the lender who preapproved me?
No. You can get preapproved by one lender and then shop around for the actual mortgage with different lenders. However, each new lender will require a new process and credit check. If you are going to shop around, do it all within 14 days so the multiple inquiries do not hurt your score.
What if I get preapproved but my financial situation changes?
Tell your lender when ready. If you lose your job, get a raise, pay off a large debt, or take on new debt, these changes affect your preapproval. The lender will re-run the numbers. In some cases, your preapproval amount will increase; in others, it will decrease. Hiding changes until closing can result in the lender withdrawing the offer.