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If you’re ready to buy a home, getting pre-approved for a mortgage loan is a vital first step. In addition to providing a clearer idea of how much you can afford, pre-approval gives you a competitive edge in the housing market. To help you move forward confidently with your homebuying journey, we’ve compiled a checklist of steps to expect on your way to pre-approval.

Step 1: Review your finances

Before applying for pre-approval, you should look at your credit score, employment history, income, and outstanding debts. Reviewing these factors can help you assess your financial readiness for homeownership and identify any areas that may need improvement.

Step 2: Check your credit report

Your credit score plays an important role in the pre-approval process. Prior to applying for pre-approval, make sure you request a copy of your credit report from the major credit bureaus to review it for accuracy. If you find any errors, contact the credit bureaus to have them corrected. You can also use your credit report to identify and address outstanding debt or collection accounts to improve your credit score.

Step 3: Gather documents

Lenders require several documents to evaluate your financial situation accurately. You should gather the following documents to apply for pre-approval:

• Proof of income (recent pay stubs, W-2 from the previous year, and tax returns for the last two years)

• Proof of assets (two months of bank statements, investment accounts, or retirement account statements). If retired, please provide a 1099 form for any pension and/or SSA income.

• Identification (driver's license or passport)

• Employment history and contact information of your employer(s)

• Documentation related to any other income sources

Step 4: Apply for pre-approval

Once you have your documentation together, you can apply online for your mortgage loan or stop by your closest branch. 

Step 5: Wait for your application to be reviewed

After submitting your application, your credit union will review your information and assess your eligibility. This includes an evaluation of your creditworthiness, debt-to-income ratio, and other relevant factors. Once this is complete, you will receive a pre-approval letter stating the loan amount you qualify for.

Step 6: Review your pre-approval letter

Carefully review your pre-approval letter to understand the terms and conditions such as the loan amount, interest rate, loan term, and any other important details. It’s important to note, this letter is not a guarantee of a loan but rather an indication of your eligibility based on the provided information.

Step 7: Start shopping!

Once you have your pre-approval letter, you can confidently begin hunting for your new home. In addition to showing sellers and real estate agents that you're a serious buyer, your pre-approval letter helps you make offers with the knowledge that you are financially qualified.

While getting pre-approved is not the same as a mortgage loan, it provides vital information and a solid foundation to empower you as you embark on your home-buying journey. If you have any additional questions about preapproval or mortgage loans in general, we are happy to help!