Why a Preapproval Letter is Crucial Before House Hunting

by Ruben Sanchez

If you're considering buying a home, obtaining a mortgage preapproval letter should be your first step before house hunting. A preapproval letter proves that a lender has evaluated your financial situation and is willing to extend a loan, subject to final underwriting. This document can streamline your home buying process, strengthen your offer in a competitive market, and prevent unnecessary disappointments down the road.

What is a Preapproval Letter?

A mortgage preapproval letter is an official document from a lender stating that you qualify for a certain loan amount based on a review of your financial background. Unlike a prequalification—which is an informal estimate—a preapproval involves a thorough analysis of your credit, income, and assets.

Why You Need a Preapproval Before Shopping for a Home

It Defines Your Budget
- A preapproval letter clarifies how much house you can afford, preventing you from falling in love with homes outside your financial reach.
It Strengthens Your Offer
- In a competitive housing market, sellers prefer buyers with preapproval letters because it shows you’re serious and financially prepared. Some sellers won't even consider offers without one.
It Speeds Up the Loan Process
- Since preapproval involves initial underwriting, it reduces delays when finalizing your mortgage.
It Highlights Financial Red Flags Early
- If there are issues with your credit score, debt-to-income ratio (DTI), or employment verification, a preapproval allows you to fix them before making an offer.
It Gives You Negotiating Power
- If you’re competing against other buyers, sellers may choose you over someone who hasn’t been preapproved.

What Documents Do You Need for a Mortgage Preapproval?

Lenders require financial documents to verify your ability to repay a loan. Here are the key items needed:

Income & Employment Verification

✔ Pay Stubs – Typically, your last 30 days of income statements
✔ W-2 Forms – For the last 2 years
✔ Tax Returns – Self-employed individuals must provide two years of personal and business tax returns
✔ Employer Verification – Some lenders will call your employer for confirmation

Credit & Debt Information

✔ Credit Report & Score – Lenders will pull your credit history from all three bureaus
✔ Debt Statements – Including car loans, student loans, and credit cards

Assets & Liabilities

✔ Bank Statements – At least two months of checking & savings accounts
✔ Investment & Retirement Accounts – 401(k), IRA, or stock portfolio statements
✔ Down Payment Source – If using gift funds, lenders may require a gift letter confirming the source

Additional Documentation (Case-by-Case Basis)

✔ Divorce Decree – If applicable for child support/alimony obligations
✔ Bankruptcy/Foreclosure Records – If applicable
✔ Rental History – If not currently a homeowner

How Long Does a Preapproval Last?

Most mortgage preapprovals are valid for 60 to 90 days. If you don’t find a home within that timeframe, you may need to update your financial documents and obtain a new preapproval.

Final Thoughts

Getting preapproved before house hunting is a smart move that saves time, reduces stress, and strengthens your offer. It gives you a realistic budget, allows you to fix financial issues upfront, and ensures you're prepared when you find the perfect home.

Ready to Get Preapproved?

If you’re serious about buying a home, now is the time to gather your documents and speak with me so I can connect you with my loan specialist. Call or text me at (714) 656-6325.

A preapproval could be the key to landing your dream home!