How to Get Preapproved for a Mortgage

Have you ever heard of the 30% rule? It’s a widely touted piece of financial advice that says you should spend no more than 30% of your income on rent. Financial experts believe that adhering to this rule helps you live within your means. But why spend 30% of your income on renting a home when you can allocate the same funds towards purchasing one through a mortgage?

Paying mortgage lenders instead of landlords every month will help you build your long-term wealth instead of taking away from it. It’ll also ensure you end up with a permanent place to call home! But what’s the optimal way to go about getting a mortgage pre-approval?

Here’s a step-by-step guide on how to get preapproved for mortgage loans.

Step 1: Gather All the Required Documents in One Place

If you want to get preapproved for a mortgage as quickly as possible, it’s important to organize all the required documents in one place. This will make it easy for mortgage lenders to determine whether you qualify for a mortgage pre-approval in one sitting.

If you skip this step, it’ll take longer to get preapproved because you’ll constantly find yourself going back and forth with the mortgage broker trying to piece together the information you require for a successful application. If the mortgage broker charges a fee for every consultation, you’ll also end up paying a hefty sum for being unorganized!

Step 2: Ready Your Proof of Income & Tax Documents

One of the first pieces of information mortgage lenders look for during the mortgage pre-approval process is the borrower’s proof of income. This includes information on income the borrower has received from their employer or their own business, as well as passive income from investments.

If you’re employed by a company, retrieve your W-2 forms from the last two years. It’s also worth retrieving copies of your latest payslips and bank statements showing your salary being credited regularly. If you don’t have your payslips handy, reach out to your employer’s human resources department for assistance.

If you’re self-employed, retrieve your business’s income statements showing revenue and costs over the last two years. Additionally, retrieve any 1120 forms you’ve lodged for your company in the last two years (unless you’re a sole proprietor—in which case you just need your personal bank statements).

If you’ve invested in financial instruments like stocks, prepare copies of any 1040 forms you’ve lodged declaring capital gains or losses in the last couple of years. This will help mortgage lenders assess your financial acumen.

Step 3: Check Your Credit History

Have you checked your FICO score recently? It’s a three-digit credit score that reflects your ability to repay credit obligations. The higher your FICO score, the more likely it’ll be for you to get preapproved for a mortgage on favorable terms. Therefore, it’s important to check your credit history before you apply for mortgage pre-approval.

If your credit score is low, we recommend paying down as much debt as possible before applying for a mortgage pre-approval. It’s also worth speaking to mortgage lenders about bad credit mortgage loans. There are numerous mortgages like FHA loans that borrowers are eligible to obtain even with a poor credit history—although the down payment on these loans can be as high as 10%.  

Step 4: Organize Your Employment Documents

If you’re submitting proof of income documents like W-2 forms, chances are you won’t be required to submit additional documents proving your employment. However, there’s no harm in providing these to the mortgage broker as further proof of your ability to pay back mortgage loans!

We recommend retrieving your employment confirmation letter as well as documents highlighting salary increments and/or performance bonuses you’ve received at work. If you’re self-employed, organize copies of both federal and state licenses and permits you submitted to bodies like the SBA when you launched your business.

Step 5: Ensure You Have Valid Proof of Identity

You might think it’s too obvious to check whether you have a valid photo ID before applying for a mortgage pre-approval. But why leave it to chance? Whether you’re applying using your driver’s license, passport, or a state-issued photo ID, have a quick look to see if it’s still valid.

If your proof of identity expires within the next couple of months, it’s worth getting it renewed before applying for a mortgage pre-approval. The last thing you want is for your mortgage pre-approval to be turned down because your photo ID expired during the pre-approval process!

Step 6: Arrange Supporting Documentation if You’re Undergoing Financial Difficulties

Unfortunately, financial difficulties can strike anyone without warning. If you’re applying for a mortgage pre-approval while undergoing financial difficulties, arrange as many documents explaining your situation. This includes divorce or separation documents and letters of explanation for debts you’ve defaulted on in the past.

If a friend or family member is helping you pay the down payment on your mortgage, it’s also worth asking your mortgage broker for a form you can fill out to declare this.

Step 7: Reach Out to a Licensed Mortgage Lender

Once you’ve got all your documents ready, the last step is to reach out to a licensed mortgage lender! Remember—the more supporting documents you bring with you when you consult the mortgage broker, the higher your chances of kick-starting the mortgage pre-approval process immediately. So, ensure you organize everything we’ve mentioned above before meeting with a mortgage lender.

If you’ve got your documents ready and you’re eager to reach out to a licensed mortgage lender in New York, we’re ready to welcome you at Atlantic Home Capital. Our team has guided countless clients through the pre-approval process for an array of mortgage loans, including VA loans for military personnel and investment property loans for real estate investors. We also provide comprehensive refinancing services to help our clients switch from their old mortgage loans to new ones.

Get an expert mortgage broker to guide you through the mortgage pre-approval process by contacting us today.