What a pre-approval gives you:
- A maximum mortgage amount, based on your income, debts, credit and down payment.
- A rate hold, so if rates rise while you're looking, you're protected.
- Early warning of problems, like credit issues, documentation gaps or down payment questions, while there's still time to fix them.
- Credibility with sellers, who take buyers with financing in place more seriously.
What it doesn't guarantee. A lender can still say no after you've been pre-approved. The most common reasons:
- The property. The lender has to be satisfied with the house itself and its appraised value. If the appraisal comes in below the price, you cover the gap.
- Changes in your situation. A new job, a new car loan or a missed payment between pre-approval and closing can change the answer.
- Documents. The pre-approval is based on what you told the lender; the final approval is based on what you can prove.
How to protect yourself. Don't take on new debt or change jobs between pre-approval and closing without talking to your lender first. Keep your broker in the loop as soon as you're serious about a property. And if you're going firm, confirm the details with your lender before you sign, not after.
