Pre-Approvals 101: Why They Matter and How to Get One

"Do I really need a pre-approval letter? Can't I just start looking at houses and figure out the financing later?" This question comes up constantly, and I understand why. Pre-approval feels like extra paperwork when you're excited to start house hunting.

But here's the reality: in today's competitive market, shopping for homes without a pre-approval is like showing up to a car dealership without knowing if you can afford the cars you're looking at. You might fall in love with something you can't buy, waste time on properties outside your budget, or worse—lose your dream home to someone who came prepared.

Let me walk you through what pre-approval actually means, why it's become essential, and how to get one that actually helps you win in this market.

Pre-Approval vs. Pre-Qualification: Know the Difference

Many people confuse these terms, but they're completely different levels of commitment:

Pre-qualification is essentially an educated guess based on information you provide over the phone. No documents reviewed, no credit pulled, no verification. It's like asking someone your height and weight and guessing your shirt size—it might be close, but it's not reliable.

Pre-approval involves actually reviewing your credit report, income documentation, asset statements, and employment verification. We're running your information through our underwriting systems and confirming you meet lending guidelines. It's a commitment from us that we can and will lend you the specified amount, assuming the property meets requirements.

Sellers and real estate agents know the difference. A pre-qualification letter might get you in the door to view homes, but a solid pre-approval letter is what wins contracts.

Why Pre-Approval Has Become Non-Negotiable

Seller expectations: In competitive markets, sellers often receive multiple offers. They're going to choose the buyer who looks most likely to actually close. A strong pre-approval letter signals that you're a serious buyer who won't have financing surprises.

Accurate budgeting: Pre-approval tells you exactly what you can afford, not just what online calculators estimate. This prevents you from falling in love with homes outside your price range or, equally important, looking at homes well below what you could actually afford.

Faster closings: Since much of the documentation and verification is done upfront, pre-approved buyers can often close faster than those starting the mortgage process after going under contract.

Negotiating power: Sellers are more willing to negotiate on price, repairs, or closing costs when they're confident the buyer can actually get financing.

Rate protection: Some lenders offer rate locks during the pre-approval period, protecting you from interest rate increases while you shop.

What Documents You'll Need for Pre-Approval

Getting pre-approved isn't as complicated as people think, but it does require documentation. Here's what you'll typically need:

Income verification:

• Two years of tax returns with all schedules

• Recent pay stubs (usually last 30 days)

• W-2 forms for the past two years

• If self-employed: profit/loss statements, business tax returns

Asset documentation:

• Bank statements for all accounts (usually last 2 months)

• Investment account statements

• Retirement account statements

• Documentation for gift funds if applicable

Employment verification:

• Contact information for current employer

• Employment history for past two years

• If you're changing jobs: offer letter from new employer

Credit information:

• We'll pull this directly, but know your approximate score

• List of any outstanding debts not on your credit report

Other documentation:

• Driver's license or state ID

• Social Security card

• Divorce decree if applicable

• Child support/alimony documentation

The Pre-Approval Process: What Actually Happens

Initial consultation: We review your financial situation, discuss your goals, and determine which loan programs might work best for you.

Document collection: You provide the documentation listed above. Don't worry if you don't have everything immediately—we can start the process and add documents as you gather them.

Credit and income analysis: We pull your credit report and verify your income meets lending guidelines for your desired loan amount.

Debt-to-income calculations: We calculate your total monthly obligations to ensure your new mortgage payment fits within acceptable ratios.

System approval: We run your complete profile through our underwriting systems to confirm approval at the specified loan amount.

Pre-approval letter: Once approved, we issue a pre-approval letter specifying your maximum loan amount, estimated down payment, and expiration date.

Common Pre-Approval Mistakes to Avoid

Applying with multiple lenders simultaneously: Multiple credit pulls can lower your score. Choose one trusted lender for pre-approval, then shop around only if needed.

Overstating your income: Be honest about your actual income. Exaggerating will only cause problems later when documentation doesn't match.

Hiding debts or credit issues: We'll discover them anyway when we pull your credit. It's better to discuss potential issues upfront so we can address them.

Making financial changes during the process: Don't change jobs, make large purchases, or open new credit accounts while getting pre-approved.

Assuming pre-approval lasts forever: Most pre-approval letters expire after 60-90 days. You'll need updates if your house hunting takes longer.

How Strong Pre-Approval Wins Contracts

A well-written pre-approval letter includes specific details that demonstrate you're a qualified buyer:

• Exact loan amount approved

• Type of loan program

• Down payment amount

• Verification that income and assets have been reviewed

• Lender contact information for verification

• Clear expiration date

Some lenders provide additional documentation like verification of employment or asset letters to further strengthen your offer.

Special Situations: When Pre-Approval Gets Complex

Self-employed borrowers: You'll need additional documentation and possibly different loan programs. The process takes longer but is absolutely doable.

Recent job changes: This doesn't disqualify you, but we'll need to verify the new position is permanent and document any gaps in employment.

Credit issues: Past credit problems don't automatically prevent approval. We can often work with credit scores that other lenders might decline.

Gift funds: If family is helping with your down payment, we need proper documentation to show it's a gift, not a loan.

Investment income: Rental properties, dividends, or other investment income require additional documentation but can strengthen your application.

Maintaining Your Pre-Approval

Once you have pre-approval, protecting it is crucial:

Don't make major purchases: That new car or furniture can change your debt-to-income ratio and affect your approval.

Maintain employment stability: If you must change jobs, communicate with us immediately so we can determine how it affects your approval.

Keep your financial picture stable: Avoid opening new credit accounts, making large deposits or withdrawals, or changing your financial situation significantly.

Stay in communication: If anything changes in your life—job, income, debts, family situation—let us know right away.

The Landry Approach: Pre-Approval That Actually Helps

We don't just run your credit and give you a number. We take time to understand your complete financial picture, explain your options clearly, and provide pre-approval letters that carry weight with sellers and real estate agents.

Our pre-approval process includes education about the home buying process, realistic budget discussions, and ongoing support throughout your house hunting journey. We want you to feel confident and prepared, not just approved.

Most importantly, we stand behind our pre-approval letters. When we say you're approved for a certain amount, you can count on us to deliver—assuming you maintain the financial picture we've approved and the property meets standard requirements.

Ready to get pre-approved and start house hunting with confidence? Let's review your financial situation and get you a strong pre-approval letter that opens doors in today's competitive market.