What Does “Preapproval” Really Mean? (And Why It Matters When You Buy a Home)

If you’ve started browsing homes, you’ve probably heard that you should “get preapproved.” But what is preapproval, exactly—and how does it help you? Here’s the straight talk you wish someone told you on day one.

Preapproval, in plain English

Preapproval is a lender’s conditional green light that says, based on a review of your finances today, you’re qualified to borrow up to a certain amount. It’s stronger than a casual estimate and comes with a letter you can show sellers.

Key idea: It’s a conditional yes—not the final loan approval you’ll get right before closing.

Preapproval vs. Prequalification (they’re not the same)

• Prequalification: A quick estimate, often based on self-reported numbers. Soft credit pull or none. Good for early budgeting.
• Preapproval: Documented verification (pay stubs, W-2s/1099s, bank statements), plus a hard credit pull. Much more credible to sellers and agents.

What lenders actually check

• Income & employment: Pay stubs, W-2s/1099s, job history, sometimes employment verification
• Assets: Bank statements to confirm down payment and closing funds
• Debts: Credit cards, student loans, auto loans, etc. (your DTI—debt-to-income ratio)
• Credit: Score, history, and any red flags (late payments, collections)

Pro tip: Avoid big financial changes (new credit cards, car purchases, job hops) between preapproval and closing. Lenders re-verify before they issue the final approval.

What preapproval does for you?

• Gives you a real budget: You’ll know your price range and likely monthly payment.
• Strengthens your offer: Sellers take preapproved buyers more seriously, especially in competitive markets.
• Speeds up closing: Much of the underwriting legwork is already done.

What preapproval doesn’t do?

• Guarantee the loan: Final approval still depends on a satisfactory appraisal, clear title, stable finances, and underwriting checks right before closing.
• Lock your rate forever: Rate locks have windows; your lender can explain timing.
• Last indefinitely: Most letters are valid 60–90 days and can be refreshed with updated docs.

How long it takes—and what you’ll need

Many buyers can get preapproved in 24–72 hours once documents are provided.

Common document checklist:

• Last 30 days of pay stubs
• Last 2 years of W-2s (or full tax returns if self-employed)
• Last 1–2 months of bank statements (all pages)
• Government ID
• Proof of additional assets (401k, brokerage) if applicable

The appraisal + underwriting piece (after you’re under contract)

• Appraisal: Confirms the home’s value supports the loan amount.
• Underwriting: A deeper review of your file + property docs.
• Clear to Close: The lender’s final “yes,” then you sign and get the keys.

Common myths—busted

• “I need 20% down.” Not always. There are low-down-payment and zero-down options for qualified buyers.
• “Preapproval will tank my credit.” One hard inquiry has a minor, usually temporary effect. Multiple mortgage pulls within a short “shopping window” are typically treated as one.
• “I should find a house first.” Getting preapproved first prevents surprises and makes your offers competitive.

Quick FAQs

How much house can I afford?

Your lender will look at your DTI and comfort level. A good thumb rule is to keep total housing costs within a sustainable portion of your monthly income.

Fixed vs. adjustable rates?

Fixed offers predictable payments. Adjustable can start lower but may rise later. Your time horizon matters.

Should I talk to more than one lender?

Yes—rate and fee structures vary. Shop smart within the same 14–45 day window to minimize credit impact.

Smart next steps

1. Gather your docs (list above).
2. Connect with a trusted local agent who can align neighborhoods and budgets.
3. Get preapproved so you can shop and offer with confidence.

Ready to move from “just looking” to “let’s go see it”?

Contact Stacy Hobson with J Hunter Realty to start your home-buying process—from preapproval to closing day. Stacy can connect you with reputable local lenders, prep your documents list, and position your offer to win.

Reach out to Stacy Hobson at J Hunter Realty today to get started!