How to Get Approved for a Home Loan in 3 Steps

By: Peter Warden Updated By: Ryan Tronier Reviewed By: Paul Centopani
December 1, 2023 - 12 min read

Getting approved for a home loan can be quicker than you think

If you’re wondering how to get approved for a home loan, you’re in the right place. This guide walks you through the approval process step-by-step, including:

  1. Getting preapproved by a lender
  2. Completing a full application
  3. Securing final approval

Here’s what you need to know at each stage of the process.

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Loan approval vs prequalification vs pre approval

Understanding how to get approved for a home loan can be a complex journey, especially for a first-time home buyer eyeing a new house or a repeat buyer looking to refinance their existing mortgage loan.

Understanding how to navigate home loan approval, prequalification, and pre approval is important in the mortgage application process. Let’s break down these terms to help you make informed decisions.

Home loan approval

Home loan approval is the final green light from a lender stating that you’re eligible to borrow a specific loan amount for purchasing a home.

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It’s based on a thorough examination of your financial situation, including your credit history, monthly income, and down payment. Getting approved for a home loan means you’ve passed all the necessary checks, and the lender is confident in your ability to repay the mortgage loan.

Loan prequalification

Loan prequalification is an initial step in the home-buying process. It’s a quick assessment by a loan officer to estimate how much you might be eligible to borrow.

This process usually involves a basic review of your personal finances without a detailed examination. While mortgage prequalification can give you an idea of your loan options, it doesn’t guarantee loan approval or a specific loan amount. Think of it as a first glance into what you might expect when you apply for a home loan.

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Loan pre approval

Loan pre approval is a more advanced step than prequalification. It involves a more comprehensive review of your finances, including credit checks and verification of your income and debts.

A mortgage pre approval letter indicates a lender’s willingness to offer you a loan, stating the type of loan, purchase price, and loan term you qualify for. Pre approval is particularly helpful when negotiating with home sellers, as it demonstrates your serious intent and financial readiness for homeownership.

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Each of these steps plays a vital role in preparing you for a successful mortgage application. While mortgage prequalification gives you a basic idea, pre approval puts you in a stronger position, especially in competitive markets.

Ultimately, final loan approval opens the door to your new home, making understanding these differences essential in your journey to how to get a loan for a house. Remember, exploring loan options with multiple lenders can help you find the best terms suited to your situation.

How to get approved for a home loan

If you’re wondering how to get approved for a home loan, it’s important to understand the steps involved in the mortgage process. From preapproval to finalizing your loan, each stage requires careful preparation and informed decision-making.

1. Get pre approved by a lender

Mortgage pre approval is the very first stage of the home-buying process. It’s basically a trial run that will tell you how likely you are to get approved for a mortgage and how much you’re qualified to borrow.

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When it comes to house hunting, your pre approval letter is very important.

  1. It tells you how much you can afford to pay for your next home. So, you only look at homes you can afford and won’t be disappointed if you find your perfect place and it turns out to be too costly for you
  2. It makes home sellers and real estate agents take you seriously. Most sellers will only consider an offer from a preapproved buyer, especially in a competitive market

You can also get prequalified if you want a quick estimate of your home buying budget. The process is typically faster and easier than pre approval. But getting prequalified won’t give you the power to make an offer on a house like a pre approval will.

How to get preapproved for a home loan

Getting a pre approval is itself a three-step process:

  1. Pick a lender: We can put you in touch with some or you might choose your existing bank or a recommendation from a friend or family member. At this point, you’re not making a commitment and will have a chance to comparison shop later
  2. Complete a pre approval application: This might take only 10-20 minutes online. If your lender thinks you might be better suited to a different type of mortgage, it might suggest you consider that
  3. Document your identity, income, and assets: Most lenders now allow you to upload your documents online for a quick pre approval decision

If you meet the basic home loan requirements, you’ll then receive your mortgage pre approval letter. Nowadays, some lenders can provide those in hours or minutes. You can show this letter to real estate agents and sellers as proof that you’re a viable buyer.

For more details on each step, read: How to get a mortgage pre approval.

Can you get preapproved for a home loan more than once?

Mortgage pre approval letters have expiration dates. And you may need to renew yours several times during the house-hunting process. Don’t worry; lenders are used to that. But always keep your letter current. The last thing you want to do is find your perfect home, make an offer, and then discover your letter has expired.

Note that these letters are tied to the applicable mortgage rate at the time they were issued. If rates have generally risen since then, you may be able to borrow less. If they’ve fallen, you may be in line for a bigger mortgage. Call your lender to stay up-to-date.

2. Complete a full application

Getting preapproved means your lender is willing, in principle, to lend to you up to a certain amount of money. But after signing a home purchase agreement, you’ll need to complete a full application for a mortgage on the property you’re buying.

This is the moment when you should comparison shop for the best mortgage lender and rates. In other words, you should apply to several lenders to find which offers you the lowest mortgage rate and best overall deal. Seriously, by shopping around, you could save thousands in just a few years.

If you stick with the lender that preapproved you, you’ll likely have to resubmit all or most of the documents you provided earlier just to be sure it has the latest information.

And, of course, if you switch lenders, you’ll need to provide the whole lot.

If you want your application approved quickly, gather all the documents you’ll need in advance. And scan them if you’ll be uploading them or emailing them. Or make copies if you’ll be mailing them or dropping them off at a branch. The faster you send them in, the sooner your mortgage can be approved.

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Here’s a checklist of everything you’ll need to get approved for a home loan.

3. Get final approval from the underwriter

“Underwriting” is the final stage of the mortgage approval process. During underwriting, the lender does a thorough review of your credit, income, assets, debts, and your future home. A specialist underwriter combs through the paperwork, checking for red flags and hidden risks.

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During this stage of the mortgage process, be as patient and responsive to the underwriter’s queries as possible. The sooner you resolve issues, the more quickly you can be cleared to proceed to closing.

Many applications sail through with few if any queries. But the more complicated your application is, the more issues your underwriter is likely to raise. This tends to be the case with applicants who are self-employed, rely a lot on tips and bonuses, or who have a troubled employment history.

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Requirements to get approved for a home loan

The requirements to get approved for a home loan can seem daunting, especially for those embarking on the journey of homeownership for the first time.

Understanding these requirements is key to a successful mortgage application. Here’s what you need to know to increase your chances of getting approved for a home loan.

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Credit score requirements

Your credit score plays a pivotal role in determining your eligibility for a mortgage loan. A higher credit score often means more favorable loan options and interest rates.

While a good to excellent score is generally preferred, some loan programs, such as those provided by the Department of Veterans Affairs, may be less strict. Meeting this requirement is an important step in how to get a loan for a house.

Loan TypeFICO Score Requirement
Conventional loans620+
FHA loans580+
VA loansNo minimum, but 620+ preferred
USDA loansNo minimum, but 640+ preferred

Qualifying income

Lenders evaluate your monthly income to determine your ability to repay a home loan before approving it.

This evaluation takes into account your salary and other income sources like bonuses, part-time work, or freelance earnings. Some lenders may also consider income from social security, alimony, or child support.

You’ll need to prove a history of stable income. Lenders typically ask for pay stubs, tax returns, or employer verification to confirm your income. This process is to verify financial stability, a key factor in mortgage approval.

On-time payment history

Lenders evaluate your payment history to assess your ability to handle financial obligations. This includes examining how you’ve managed your credit card, student loan, car loan, or other debt repayments.

A history of timely payments indicates responsible financial behavior. Conversely, late payments or defaults can negatively impact a lender’s assessment of your reliability. A consistent record of timely payments can positively influence your credit score and your standing with potential lenders, improving your likelihood of loan approval.

Reasonable debt-to-income ratio (DTI)

Your DTI ratio is a comparison of your total monthly debt payments by your gross monthly income. This ratio helps lenders gauge how much additional debt you can handle and maintain timely payments.

For the purposes of a mortgage loan application, your existing monthly debt also includes your potential new housing costs. So that encompasses monthly mortgage payments (principal and interest), property taxes, and homeowners’ insurance, plus any mortgage insurance or homeowners’ association dues.

While each mortgage lender may have different thresholds, a lower DTI is universally favored. Generally, a 36% debt-to-income ratio is “ideal,” but anything under 43% is considered “good.”

Loan TypeDTI Ratio
Conventional loans36% (up to 45% with compensating factors)
FHA loans43% (up to 57% in some cases)
VA loans41% (higher with compensating factors)
USDA loans41% (higher with compensating factors)

A favorable DTI ratio signals to lenders that you’re not overextended with debt and can comfortably manage new mortgage obligations, thus boosting your prospects of getting approved for a home loan.

Down payment minimums

Your down payment is the amount of cash you pay upfront toward the purchase of a home. Down payments vary in size and are typically expressed as a percentage of the purchase price. For example, a 10% down payment on a $300,000 home is $30,000.

The down payment is a key component of a mortgage application. It varies based on the type of loan and lender.

  • Conventional loans typically require anywhere from 3% to 20%, with higher down payments often resulting in more favorable loan terms and lower interest rates.
  • Government-backed loans like FHA loans, VA loans, and USDA loans may offer lower or no down payment options, making them attractive for those who cannot afford a large upfront payment.

However, it’s important to remember that a smaller down payment usually means a larger loan amount and potentially higher costs over the life of the loan. For many buyers, particularly first-time home buyers, balancing the down payment amount with other financial goals and obligations is a key step in the home-buying process.

Loan TypeDown Payment Requirement
Conventional loans3-20%
FHA loans3.5%
VA loansNo down payment required
USDA loansNo down payment required

Additionally, borrowers who put less than 20% down on a conventional mortgage will have to pay private mortgage insurance (PMI) until your principal loan balance drops to 80% of your home’s current appraised value.

FAQ: How to get approved for a home loan

How to get approved for a home loan quickly?

Prepare all the documents you’ll need before you apply and be responsive to queries. Choose a lender with an end-to-end digital mortgage process if you want the speediest approval or pre approval. Understanding and following these steps is essential to learning how to get approved for a home loan quickly.

What will stop me from getting approved for a home loan?

The main barriers to mortgage approval are too low of a credit score, too small of a down payment, too high of a debt-to-income ratio, or an unreliable employment history. Addressing these issues is key to understanding how to get approved for a home loan.

What should I bring to the bank for a home loan?

You’ll need to bring a variety of financial documents to the bank for a home loan, including past years’ W2s—or 1099s for self-employed borrowers—tax returns, pay stubs, and bank statements. You’ll also need identification, like a driver’s license. The lender will also pull your credit and verify your employment status. Most lenders have digital application portals nowadays where you can upload these documents digitally instead of bringing physical copies to a brick-and-mortar office.

What credit score do you need to get approved for a house? 

FHA loans have the lowest FICO score thresholds: 580 with a 3.5 percent down payment or 500 with a 10 percent down payment. But you may be better off with a loan from Fannie Mae or Freddie Mac and their minimum score is 620.

Does a pre approval hurt your credit? 

There’s a hard credit check during the pre approval process, but this typically dings your credit score by only five points or less. And don’t worry about comparison shopping. “Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry,” says the Consumer Financial Protection Bureau (CFPB). This aspect is a small but important part of how to get approved for a home loan.

Is pre approval for a mortgage required? 

Technically, no. However, sellers and real estate agents are unlikely to take you seriously if you can’t show a current pre approval letter. If you’re making an offer on a home, the seller and their agent want to know you’re a serious buyer with financing lined up who can afford the property.

Getting approved for a home loan

Are you ready to learn how to get approved for a home loan and begin your homeownership journey?

If you’re getting serious about house hunting, it’s time to start the home loan approval process. You’ll want to be preapproved before you make an offer on a home, and then apply for full approval once you have a purchase agreement in place.

By following the tips in this article, you can find the best mortgage loan for your financial situation.

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Peter Warden
Authored By: Peter Warden
The Mortgage Reports Editor
Peter Warden has been writing for a decade about mortgages, personal finance, credit cards, and insurance. His work has appeared across a wide range of media. He lives in a small town with his partner of 25 years.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.