Before you start home shopping, it’s best to get preapproved for a mortgage. A preapproval letter makes your offer stronger when you find the home of your dreams. It’s also one of the fastest steps in the mortgage process.
If you’re ready to buy a home, take a look at Benzinga’s guide to getting preapproved.
Question: How Long Does it Take to Get Preapproved for a Mortgage?
Answer: A preapproval takes anywhere from 1 to 10 business days, depending on the lender and how extensive its preapproval process is. Some lenders will preapprove you after a credit check based on the personal information you provide. Others want to review a full application and all of your required documentation.
What Do You Need for Mortgage Preapproval?
Since each lender takes its own approach to preapproval, the exact documents you need vary by lender. The best approach is to gather all the documents you’ll need to get a mortgage and keep them organized and ready to send to potential lenders.
It might take a little time, but getting organized will make the process less stressful in the long run. Here is a checklist of documents to gather:
- Pay stubs for the last month
- W-2s for the past 2 years
- Tax returns for the past 2 years
- Bank statements for the past 2 months
- Documentation of any other sources of income (child support, spousal support, etc.)
- Documentation of the source of your down payment
- Investment fund or savings account statements showing 2 months of ownership
- For gift funds, ask for a letter from the person or organization gifting the funds. The lender may also need documentation from the gifter showing their ownership of the funds, like 2 months of bank statements.
- Proof of identity, like a government-issued ID
- Your Social Security number
- Documentation of your name change if it’s recent (court documents, marriage certificate or divorce decree)
- Certificate of completion for a home buyer education class, if you anticipate applying for a loan that requires one
Keep in mind that in some situations, you might need even more documentation. For example, those who are self-employed may want to gather 1 to 2 years of bank statements, 2 years of business returns and your most recent profit and loss statement in addition to the standard documents. This is because you want to show your true income to lenders. Your tax returns don’t always reflect your actual income because of your business deductions.
Mortgage Preapproval Process
While each lender has a different preapproval process, the preapproval process generally plays out in the following steps:
- Contact or visit the websites of potential lenders. Look at the loan options and interest rates. Keep in mind that the rate you’re offered might be different based on your credit score and other factors.
- Decide which lender or lenders you want to approach for preapproval. Keep in mind that at this point, you’re not making a commitment and neither is the lender. The lender says that it will likely approve you once it verifies your information. You can still decide to work with another lender.
- Complete the lender’s preapproval application and upload or send any needed documents. Many lenders offer an online application for preapproval, which helps to speed things along. Ask questions if there’s anything on the application you’re uncertain about.
- Receive and review your preapproval letter. If you’re approved for more than you’re planning to spend, ask the lender to adjust the preapproval letter. You don’t want to give home sellers a preapproval letter that shows you can afford more than you’re offering. You want to provide a preapproval that matches your offer. Have your real estate agent review the letter as well to make sure it provides enough information to sellers.
What If You’re Denied a Mortgage Preapproval?
It’s possible for a lender to deny you at the mortgage preapproval stage. But it’s important not to give up at this point. With time and effort, you can position yourself to qualify for a mortgage.
The first step is to talk to the lender to find out why you were declined. Lenders will send a letter if they used your credit score to deny your preapproval. The letter will include which credit score it used to make its decision and how to get a free copy of your credit report. You’re entitled to a free copy when the information is used to decline your application.
Once you have your credit report in hand, review it for errors. The Consumer Financial Protection Bureau (CFPB) offers a review checklist to make sure you look at all the details. If you find mistakes, you will need to correct them in writing by contacting the credit reporting agency and the source of the mistake.
For example, if a company is claiming you made a late payment, and you have proof you didn’t, write a letter explaining the error. Include a copy (not the original) of your proof of payment like a bank statement or cleared check.
You’ll also want to look for areas to improve. For example, if you have high credit card balances, you may want to pay them down to 30% or less of your credit line. Let’s say you have a card with a $1,200 limit. If you can, pay it down to $400 or less.
If you’re not sure where to start, consider working with a HUD-approved housing counselor. These counselors can review your financial situation and help you decide on concrete steps so you can get preapproved for a mortgage. You can find a counselor by calling 800-569-4287 or by visiting the CFPB website.
Best Mortgage Lenders for Preapproval Process
1. Best Overall: Quicken Loans®
Quicken Loans offers a straightforward online preapproval process through Rocket Mortgage® by Quicken Loans®. It has award-winning customer service and it’s been ranked at the top for customer satisfaction by J.D. Power for 10 consecutive years.
You can easily chat or call and talk with an expert if you have any questions about getting preapproved. Quicken Loans offers extensive educational materials on its website so it’s a great resource for a first-time home buyer.
2. Best for Veterans: Veterans United
Veterans United gets rave reviews from its borrowers — for good reason. It offers clear information about the preapproval process. Representatives are available around the clock to make sure you can get information when you need it.
You can start the process from the Veterans United website or by phone. Veterans United is a top VA lender, which means it has the expertise to walk you through the entire VA loan process.
3. Best for Self-Employed Borrowers: American Financing
American Financing offers a quick preapproval and a digital mortgage process. In addition to standard loan options like conventional and FHA loans, American Financing also offers a bank statement loan program. This can be an excellent choice if you’re self-employed and sometimes struggle to find a mortgage despite reliable income.
Call, chat or text a mortgage consultant to get more information or start the preapproval process. American Financing gets excellent reviews from borrowers.
4. Best for an Online Mortgage Process: Better.com
Better.com offers one of the quickest preapprovals around — 3 minutes for a basic preapproval and 20 minutes for a verified preapproval. Better offers a completely online mortgage experience. It also doesn’t charge any lender fees, which can involve significant savings. Its experts are available at any time if you have questions along the way.
5. Best for FHA Loans: loanDepot
loanDepot uses technology to make the preapproval process speedy. Its experts are experienced with FHA loans and you can work with a loan officer in person if you live near a local branch.
Start an application online, by phone or in person. loanDepot also has educational tools to help you better understand the mortgage process so you can make informed decisions along the way.
Should I Get Preapproved?
Getting preapproved helps you know exactly what you qualify for before you start home shopping. It also helps you make stronger offers, which improves your chances of buying your dream home.
For more information on the mortgage process, as well as info on programs for first-time home buyers and more, check out our mortgage guide.
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