Make House Hunting Easier With the Power of Pre-Approval

It pays to get preapproved before home shopping begins. Take the right steps on the journey to your new home.

By Navy Federal October 12, 2018

With the housing market warming up in many areas and multiple offers becoming more commonplace, buyers who want an advantage in the bidding process may need more than just a mortgage pre-qualification. If you want to increase your competitiveness, you may benefit from a pre-approval.

What's the difference?

Before you start shopping, it’s important to know the difference between pre-qualification and pre-approval:

Pre-qualification: You provide basic info to the lender and get a general idea of what you qualify for. Pre-qualification is an important start to the home-buying process, but without taking the next step, real estate agents and sellers may suspect you’re just “window shopping.”

Pre-approval: You provide financial and employment history to the lender and get a specific loan amount for which you’ve been approved. By getting a pre-approval, real estate agents and sellers will know that you’re serious and a qualified buyer.

Considerations Pre-qualification Pre-approval
Requires mortgage application No Yes
Requires application fee No Maybe
Requires credit history check No Yes
Based on review of your finances No Yes
Requires estimate of down payment amount No Yes
Lender provides an estimate of loan amount Yes No
Lender provides a specific loan amount No Yes
Lender provides interest rate information No Yes

Why should I get pre-approved?

Here are 7 key advantages:

  1. You'll discover how much you can confidently offer when you find the right home.
  2. It may open doors to homes and neighborhoods you didn't realize you could afford.
  3. It will also save you time and effort by eliminating properties beyond your price range.
  4. You can shop for a home with confidence, knowing you won't be turned down for a loan.
  5. It could help you win a bidding war against others who may not qualify.
  6. You'll be considered a more serious homebuyer than someone who is "just looking."
  7. Once you find a home, the mortgage process can proceed more quickly.

When should I get pre-approved?

The best time to get pre-approved is before you begin house-hunting. Having a pre-approval can give you an advantage over other potential buyers when it comes time to negotiate and place an offer on a house.

Is there any reason to wait to get pre-approved?

Yes, if you’re not serious about making an offer on a home or think you’ll spend significant time shopping. Most lender pre-approvals are good for only 60 to 90 days. Another reason to wait may be if you don’t want an inquiry on your credit report.

How do I get pre-approved?

A lender reviews your credit history in detail to determine a specific mortgage amount for which you’re approved.

What info do I need to start digging for?

The documents to get pre-approved are the same as those you’d need to get a mortgage.

  • W2 forms from past 2 years for all borrowers
  • Pay stubs from past 1 to 3 months for all borrowers
  • Personal tax returns from past 2 years for all borrowers
  • Social Security Number
  • Monthly debt and living expenses

Once you get pre-approved, the number may exceed the amount you feel you can comfortably afford―so it pays to borrow cautiously.

For more helpful home-buying tips and information, explore Navy Federal’s MakingCents home-buying track, which offers guidance for the first-time or seasoned homebuyer.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.