Get Pre-Approved (or Pre-Qualified)
Once you feel ready to start house-hunting in earnest, you can talk to a lender or mortgage broker to get a letter indicating how much they’re prepared to lend you. This letter has two main purposes. It gives you an idea of how big a loan you can get, and it provides evidence to home sellers that you’re really in a position to buy their home – which means they’re more likely to consider your offer.
When it comes to buying your first house, some experts use the term “pre-qualification” to mean an earlier and less-formal step than “pre-approval,” requiring less verification of your financial information.6 The Consumer Financial Protection Bureau (CFPB), on the other hand, says there’s not much difference between the two terms: both refer to a letter that says the lender is willing to offer you a loan up to a certain amount, based on specific assumptions, but isn’t a guarantee that you’ll get a loan. The CFPB says the best way to make sure you get a letter that provides adequate information to potential sellers is to ask a local realtor about what’s generally needed.7
To get this letter, you may need to provide documentation including:
- Proof of income.
- Proof of assets.
- Credit score.
- Employment verification.
- Government-supplied ID.