A mortgage pre-approval is a lender’s preliminary assessment of how much you may be eligible to borrow based on the financial information and documentation available at that time. The review may include your income, employment, credit history, debts, assets, and funds available for the down payment and closing costs.

If the initial review meets the applicable requirements, you may receive a pre-approval letter to include with an offer on a home.

A pre-approval is not final loan approval. Final approval depends on factors that may include updated financial information, satisfactory documentation, the selected property, appraisal, title work, insurance, and underwriting.

The terms are sometimes used interchangeably, but they may describe different levels of review.

Pre-qualification: An initial estimate of your potential borrowing range, often based primarily on information you provide and limited documentation.

Pre-approval: A more thorough review that generally includes a mortgage application, credit review, and documentation supporting your income, assets, and debts.

The documents required depend on how you earn income and the loan program being considered. You may be asked for:

- Pay stubs and W-2s

- Tax returns, when required

- Bank or investment statements

- Employment and income history

- Details about monthly debts

- Documentation for gift funds, bonuses, commission, rental income, or self-employment, when applicable

Additional documents may be requested based on your circumstances and/or review of documentation provided.

Your purchasing power is primarily determined by two factors:

1. Your monthly income compared with your monthly debt obligations
This is called your debt-to-income ratio, or DTI. It includes your existing debts and the proposed mortgage payment.

2. The funds you have available for your down payment and closing costs

Your credit profile and loan program may also affect your available options, but DTI and available funds are the primary factors used to determine how much you may be able to afford.

Dylan can help you evaluate both the maximum amount you may qualify for and a payment range that supports your broader financial goals.

Depending on the transaction and your eligibility, possible strategies may include:

-Using personal savings

-Receiving eligible gift funds

-Exploring qualified down-payment assistance (DPA) programs

-Negotiating seller-paid closing costs

-Applying available lender credits

-Comparing a larger down payment with the benefits of retaining cash reserves

-Selecting a loan program with a lower down-payment requirement

Each strategy has eligibility requirements and potential tradeoffs. Seller credits depend on the contract, loan program, property value, and applicable limits and cannot be applied to the down payment. Assistance programs may have income, location, occupancy, education, repayment, or other requirements.

Before making an offer:

1. Complete a thorough pre-approval review.

2. Discuss your preferred and maximum monthly payment, not only the maximum loan amount.

3. Keep your financial documents organized and current.

4. Avoid opening new credit accounts or financing large purchases.

5. Do not move money between accounts without maintaining documentation.

6. Ask before changing jobs or altering how you are paid.

7. Understand the cash required for earnest money, inspections, appraisal, down payment, and closing.

8. Stay available when updated documents or signatures are requested.

9. Coordinate financing questions with Dylan before changing the purchase contract.

First-time homebuyers- First-time buyers often benefit from additional guidance about budgeting, mortgage insurance, earnest money, inspections, closing costs, and assistance-program eligibility. You do not need to know every step before starting the conversation.

Move-up buyers- If you already own a home, the strategy may depend on whether you plan to sell before buying, buy before selling, retain the current property, or use proceeds from the sale. Existing mortgage obligations and expected equity must be evaluated carefully.

New-construction buyers- New construction can involve extended timelines, builder incentives, preferred-lender offers, rate-lock considerations, deposits, upgrades, and contract terms that differ from a typical resale transaction. Compare the entire financing package—not only one advertised incentive or interest rate.

- Shopping for homes before discussing financing and getting pre-approved

- Assuming that 20% down is always required

- Focusing only on the interest rate

- Ignoring taxes, insurance, mortgage insurance, and HOA dues

- Opening a new credit card or financing a vehicle before closing

- Making large undocumented deposits

- Changing jobs without consulting the mortgage professional

- Spending funds reserved for closing, even on furnishings for the new home

- Comparing estimates from other lenders without ensuring your comparing apples to apples

- Assuming that pre-approval guarantees final approval