Many of my customers looking to buy a home come to me with some vague notion that they need a preapproval, but are unsure of what this really means. Some think it is a binding letter which means they are in an agreement with me for a specific dollar amount and that it can’t be changed. Others think it is a letter I write up for any amount they want with little to know actual documentation behind it. As with most things, the truth lies somewhere in the middle of these two misconceptions.

What a preapproval is, is simply a letter from a lender stating that, based upon a preliminary review of an applicant’s credit, income, down payment, and any other relevant factors, the applicant should be approved for a mortgage of a certain amount. I can not stress enough the should of that sentence; there are no guarantees, especially if your situation changes or any important information was not properly disclosed or was misrepresented.

Once the preapproval is obtained, you can do anything with it you like. Most bring it to their realtor to start looking for a house, and if that is what you decide to do, it serves as a great benchmark for what you can afford. Once you select your house, the preapproval is not binding, meaning you can find another lender, but it often makes sense to use the same lender, as that lender would already have your documents on file and an understanding of your unique situation. At this point, you would fill out a standard mortgage application and begin the normal mortgage process.

If you have any questions about the preapproval process, or would like to get started with your preapproval, please feel free to contact me or leave a comment.