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Things You Need to Be Pre-Approved for a Mortgage

Buying a home often starts at the lender's office with the mortgage application, not the open house. Most sellers expect buyers to have pre-approved financing and are generally willing to negotiate with those who can prove they can get a loan.

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A home seller often requires a pre-approval letter for a mortgage before negotiating with a buyer.

Pre-approval requires proof of employment, assets, tax returns and an acceptable credit rating.

Mortgage pre-approval letters are usually valid for 60 to 90 days.

After pre-approval, the lender will offer the maximum loan amount, which helps determine the price range for the home buyer.

Pre-qualification vs. pre-approval

A mortgage prequalification can be useful as an estimate of how much someone can spend on a home, but a prequalification, which is often valid for 60 to 90 days, is more valuable. This means that the lender has verified the buyer's credit, verified assets and verified employment to agree to the correct loan amount.

Buyers benefit by consulting with the lender, obtaining a pre-approval letter and discussing loan options and budget. The lender will offer the maximum loan amount, which will help determine the price range for the home buyer. A mortgage calculator can help buyers estimate costs.

Calculate your monthly payment

Your monthly mortgage payments will depend on the price of your home, the down payment, the term of the loan, property taxes, homeowner's insurance, and the loan's interest rate (which largely depends on your credit score). Use the entries below to find out what your monthly mortgage payments could be.

Enter the price of the house



Enter the down payment





Choose the term of the loan

30 years

Enter April

Or use a credit score for a grade




Your credit score

+ More options

monthly payment

$1,949.63 per month for 30 years

main benefit


Property taxes


Homeowners Insurance


Size of mortgage


Mortgage interest *


Total mortgage paid*


* Assuming a fixed interest rate. A variable rate may give you a lower upfront rate. To understand more click here.

5 Things You Need to Get Pre-Approved for a Mortgage

Prior approval requirements

Mortgage pre-approval requires the buyer to complete a mortgage application, provide proof of ownership, proof of income, good credit, proof of employment and important documents.

Pre-approval depends on the buyer's FICO credit score, debt-to-income (DTI) ratio and other factors, depending on the type of loan.

Except for mega loans, all loans comply with Fannie Mae and Freddie Mac guidelines. Some loans are aimed at low- to moderate-income homebuyers or first-time buyers. Other loans, such as Veterans Affairs (VA) loans, which do not require a down payment, are intended for US veterans and service members.

Emily Roberts {Copyright} Investopedia

Prospective homebuyers must submit W-2 wage statements and tax returns from the past two years, current payslips showing income and earnings to date, and proof of additional sources of income such as alimony or bonuses.

The borrower's bank statements and investment account prove they have the funds for the required down payment, closing costs and cash reserves. The advance, expressed as a percentage of the sales price, varies depending on the type of loan. Many loans require the buyer to purchase private mortgage insurance (PMI) unless he or she puts down at least 20% of the purchase price.

Most lenders require a FICO score of 620 or higher to be approved for a conventional loan or 580 for an FHA loan. Lenders typically maintain the lowest interest rates for customers with a credit score of 760 or higher.

The chart below shows the monthly principal and interest payments for a 30-year fixed-rate mortgage based on a combination of FICO scores for three syndicated loan amounts. The Consumer Financial Protection Bureau's Interest Rate Tool allows buyers to see how their credit score, loan type, home price and down payment amount can affect the interest rate.

On a $250,000 loan, an individual with a FICO score in the lowest range (620-639) would pay $1,288 per month, while a homeowner in the higher range (760-850) would only pay $1,062.