Preapproval is a letter from a lender that outlines the amount of loan you’re qualified to borrow, or, in essence, how much home you can afford. It means the lender did a deep dive into your finances, including your credit score and report, to determine how much to loan you.
Why It's Helpful
Having a preapproval letter from your lender puts you in a better position with sellers, and shows you’re a serious buyer. It gives you a range of home prices to shop for, knowing you’ll be within your means. And if you end up in a competition with another buyer who isn’t preapproved, you have that advantage.
When to Get Preapproved
Get preapproved as soon as you get serious about buying a home. It gives you an idea about how much you could afford and what you’d ideally like to spend – but you don’t have to spend the full amount you’ve been approved to borrow.
You can also get a pre-qualification letter from your lender. This letter is based on what your lender thinks you’d be qualified to purchase based on the information you provided them, including an estimated credit score and what you’d like to pay for your down payment.
A+ Tip: Our rent vs. own calculator can help give you an idea of what home payments could actually look like, and more!