What Does Pre-Approval Mean & Why Is It Important?

If you're looking to buy a home, you may have heard the term "pre-approval" thrown around. But what does it actually mean? And why is it important?

Pre-approval is the process of determining how much money a lender is willing to loan you to buy a home. It's an important step to take before you start house hunting because it can help you focus your search on homes that fit within your budget. Here's what you need to know about the pre-approval process:

Gather Your Financial Documents

Before you can get pre-approved, you'll need to gather some financial documents. These typically include:

• Proof of income, such as pay stubs or tax returns
• Proof of assets, such as bank statements or investment account statements
• Proof of debts, such as credit card statements or car loan statements

Choose a Lender

There are many different lenders out there, and it's important to find one that you feel comfortable working with. Look for a lender that offers competitive interest rates and good customer service.

Apply for Pre-Approval

Once you've chosen a lender, you can apply for pre-approval. The lender will review your financial documents and credit history to determine how much money they're willing to loan you. They'll also give you an idea of what your interest rate will be and what your monthly mortgage payments will be. View our lender recommendations.

Get Your Pre-Approval Letter

If you're approved for a loan, your lender will give you a pre-approval letter. This letter is an important document to have when you start house hunting because it shows sellers that you're a serious buyer and that you have the financial means to purchase their home.

Shop for Homes

With your pre-approval letter in hand, you can start shopping for homes that fit within your budget. You'll have a better idea of what you can afford, which can help you focus your search and make the home buying process more efficient.

It's important to keep in mind that pre-approval is not the same as final approval. Once you've found a home you want to buy, your lender will need to review the property and your financial situation again to make sure you still qualify for the loan.