Get Pre-Approved for a Mortgage Loan

In this step we’ll explain what is means to be pre-approved for a loan, outline the pre-approval process and explain why a pre-approval letter is so important. 

Prove your purchasing power


A pre-approval for a mortgage loan is usually referred to as a letter, known as the pre-approval letter. This letter is given to the homebuyer (borrower) from his/her lender. It states that the buyer has passed a preliminary financial screening and is a good candidate for a home loan. 

Additionally, the letter states the terms of the loan, the type of loan, and the dollar amount the bank is willing to lend the buyer. 

The mortgage pre-approval (also called a pre-qualification or “pre-qual”) is done “pre” (i.e. before) shopping for a home!



Pre-Approval Equals Purchasing Power


After choosing a lender, you will work with your assigned mortgage officer to get pre-approved for a home loan. 

There are many different loan options available, each with their own sets of requirements, fees, closing costs, points, and interest rates.

Lenders assess candidates on a case by case basis. Your lender will help you evaluate the most suitable mortgage programs for you. If you qualify for more than one type of loan, you will get pre-approved separately for each. 

At this stage your lender is looking at your ability to repay a loan by reviewing your personal finances in depth. You will need to provide your lender with information regarding your current employment, employment history, income, assets, debts, credit reports, credit score, and how you plan to use your new home. 

Once your lender has evaluated your financial situation, they will let you know how much they are willing to lend you (i.e. your home shopping fund). They will then provide you with a pre-approval letter to submit to a seller when you make an offer on a home. 



It lets you know you can obtain a home loan and therefore continue on the journey to homeownership. You’ll be wasting a lot of people’s time, including your own, looking at homes when you’re not in a financial position to actually buy at this time. 

It tells you (and your agent) how much house you can afford. The pre-approval lets you know the price range of home you can search in. It’s certainly not fun to look for homes under a cloud of dejection after discovering the homes you’ve been admiring are out of your budget.

The type of loan you are approved for could affect the location of your future home. For example, if your pre-approval is for a USDA RD (Rural Development) home loan then your home search will be limited to towns in NWA specified as “rural areas”. Lowell, Farmington and Prairie Grove are some examples of RD approved areas.

The type of loan you are approved for could stipulate the condition of your future home. For example, if your pre-approval is for a RD, VA or FHA home loan, then your home search is limited to homes in “good condition”. You can not purchase a fixer-upper type property with these loans. 

It provides the seller with proof of your purchasing power. The pre-approval lets sellers know you are a serious buyer. It shows sellers you are able to pay them what you are offering and the peace of mind to accept your offer with confidence.

Actually, many sellers require pre-approval letters before they allow potential buyers to view their homes. Why? Because showings are often inconvenient for sellers and they want to ensure their home is shown only to serious buyer candidates.

Understandably, it is also common for list agents and sellers to wait for a pre-approval letter before they respond to an offer. 

It gives you an upper hand in a sellers market. Real estate is a game of first-come first-served and whomever can present the strongest offer first often wins. Your pre-approval letter enables you to act quickly with a strong and competitive offer as soon as your dream house comes on the market. 


Commonly asked pre-approval questions

What happens if my request for pre-approval is denied? 

If you are not approved, or not approved for the amount you want, your lender can help you improve your holistic financial picture. 

Don’t be embarrassed. It is common for buyers to discover during this process that they need to improve their credit score, save for a larger down payment, pay off some debt or build a longer work history before they can buy a home. 

Count the exercise as progress. Now you know what needs to be done to make your dream of owning a home a reality. 


Is it okay to tour homes without a pre-approval letter? 

Looking at homes before knowing your purchasing power is like going shopping without your wallet. How many store owners would allow you to take home products based on your word that you’ll return with money later? 

The same is true with home buying. Not many sellers are willing to take their homes off the market based on your word that you can afford it.

Furthermore, obtaining your pre-approval letter is good buyer etiquette. The home buying process involves a lot of other people and the pre-approval letter signifies to everyone involved that you are not inappropriately taking advantage of their time and resources.

You do not need a pre-approval letter to tour open houses however. Most open houses in NWA are held on Sunday from 1-3 PM or 2-4 PM. For a list of upcoming open houses click here.


What if I want to offer less than the loan amount I am pre-approved for? 

Of course, you do not have to purchase a home for the amount you are approved for. What the bank says you can afford and what you want to spend based on your personal budget may be different.

The seller only needs to be assured you can obtain financing for the amount of your offer. They do not need to know you are approved for a $200,000 loan when your offer is for $150,000.

Therefore, you should request a custom letter from your lender for the amount of your offer before you submit it to a seller. Your lender does this all the time and can get you a custom letter quickly. 

All about lending

Your pre-approval letter is the first step in a multi-step mortgage approval process from your chosen lender. 

For more information about mortgages, choosing a lender, the lending process and types of mortgage loans visit Real Estate 101 : Financial Ins & Outs.

Use our Mortgage Payment Calculator to see what your monthly mortgage payment could be.

With proof of your buying power and a firm grasp of the lending process, it’s now time to find the perfect agent helper to guide you through the remaining steps.