How to Get Preapproved for a Mortgage and Why It’s the First Step in Your Homebuying Journey

Buying a new home is an exciting adventure, but before you can start touring homes and picking out floorplans, there’s an essential first step that sets the foundation for a smooth buying process: getting preapproved for a mortgage. Below, we’ll walk you through each step of the mortgage preapproval process and explain why it’s important.

What is Mortgage Preapproval (And How is it Different from Prequalifying)?

First, let’s clarify a common question: what’s the difference between mortgage preapproval and prequalification?

• Mortgage Prequalification is a preliminary step where a lender gives you an estimate of how much you may be able to borrow based on basic financial information you provide. Prequalification doesn’t involve an in-depth review of your financial documents, so it’s not as strong as a preapproval.
• Mortgage Preapproval, on the other hand, is a more detailed assessment. Here, a lender verifies your income, assets, credit history and other financial information, giving you an accurate borrowing amount. It shows sellers you’re a serious buyer and gives you a competitive edge in a competitive market.

Why do I Need to get Preapproved for a Mortgage?

A mortgage preapproval provides several benefits that simplify and strengthen the homebuying process:

• Helps Define Your Budget: Knowing your borrowing power allows you to search confidently within your price range.
• Gives You a Competitive Advantage: In a competitive market, sellers are more likely to choose a preapproved buyer, as it shows you have the financial backing to make the purchase.
• Speeds Up the Closing Process: Since much of your financial information has already been reviewed, the time it takes to close is often shorter for preapproved buyers.
• Helps You Identify Financial Issues Early: If there are any areas that need improvement preapproval brings them to light, so you can address them before making an offer. First America Homes also offers a free credit counseling program to help you get on track.

How do I get Preapproved for a Mortgage?

Getting preapproved for a mortgage is easier than it sounds when you know the steps. Here’s how to get started:

Step 1: Gather Your Financial Documents

To get preapproved, you’ll need to gather specific documents that provide a clear picture of your financial status. These usually include:

• Proof of Income: Recent pay stubs, tax returns and W-2 forms from the past two years.
• Proof of Assets: Bank statements, retirement accounts and any other sources of assets.
• Credit Information: Your lender will request a credit report, but you can also review it beforehand to check for any discrepancies.
• Personal Identification: Have your ID and Social Security number ready for verification.

Step 2: Research Lenders and Submit Your Application

Once you have your documents, it’s time to start looking for lenders. We recommend our preferred lender, Stone Meadow Lending, as they understand the nuances of new home construction financing.

Submit your application to your lender and they will take it from there. They’ll look over your financial information, check your credit score and evaluate your debt-to-income ratio to determine your preapproval amount.

Step 3: Review Your Preapproval Letter

Once approved, you’ll receive a preapproval letter from the lender. This letter states the amount you’re approved to borrow and the estimated interest rate. With your preapproval letter in hand, you’ll have a clear understanding of your budget, allowing you to keep your search realistic and focus on finding a home you truly love.

Tip: Be mindful that a preapproval letter has an expiration date (typically 60–90 days). If you haven’t found your home within that period, you may need to renew your preapproval.

Ready to Get Preapproved? Contact Stone Meadow Lending Today!

If you’re ready to take the first step toward homeownership, reach out to our preferred lender, Stone Meadow Lending. Their team of mortgage professionals can guide you through the preapproval process and help you understand the best loan options for your situation.

Start your homebuying journey with confidence and clarity and take that exciting first step toward owning a beautiful new home!