Before you make an offer, sellers and their agents will want to see a letter from a lender. You will hear it called a prequalification or a preapproval. Here is what those letters actually say, what makes a letter strong, and how to get one a seller will take seriously.
What both letters say
According to the Consumer Financial Protection Bureau (CFPB), prequalification and preapproval letters both state that a lender is generally willing to lend to you, up to a certain amount and based on certain assumptions. Their job is to show a seller that you are a serious buyer with financing in reach, which makes your offer stronger.
The label matters less than what’s behind it
Lenders use the two terms differently. Some call a letter based on information you report yourself, without verification, a “prequalification,” and save “preapproval” for a letter based on verified information. Others use the words the other way around, or interchangeably. The CFPB’s advice: don’t worry about which word a lender uses. Ask what the letter is actually based on.
| Ask your lender | Why it matters |
|---|---|
| Did you pull my credit? | A letter that reflects your actual credit report is more reliable than one based on an estimate. |
| Did you verify my income and assets, or is this based on what I told you? | Verified information means fewer surprises after you are under contract. |
| What assumptions is the amount based on? | The loan type, down payment, and estimated taxes and insurance all affect how much you can borrow. |
| How long is the letter good for, and what could change it? | New debt, a job change, or a change in your finances can affect your approval. |
Credit checks: what to expect
Lenders may check your credit when they issue either kind of letter. A lender’s credit check shows up as an inquiry, which typically has a small effect on your scores. The CFPB explains that multiple mortgage credit checks within a 45-day window are recorded as a single inquiry, so you can compare lenders without extra impact during that window. Checking your own credit doesn’t affect your scores, and you can get free credit reports at AnnualCreditReport.com ↗.
Getting a letter early has another benefit: it can surface credit issues while there is still time to correct them.
What to gather before you ask for a letter
Every lender’s list is a little different, but having these ready usually makes a letter faster and stronger:
- Income. Recent pay stubs and W-2s. If you are self-employed, recent tax returns.
- Assets. Recent statements for the checking, savings, and investment accounts you will use for the down payment and closing costs.
- Debts. A list of monthly obligations such as car loans, student loans, credit cards, and child support.
- Identification. A government-issued photo ID.
- Your plan. Your target price range, how much you would like to put down, and the area where you are shopping.
- Special situations. If you are a veteran or service member, your VA eligibility. If someone is giving you gift funds for the down payment, who it is and how much.
Keep your letter strong while you shop
- Avoid opening new credit cards or taking out new loans until after closing.
- Talk to April before changing jobs or moving large amounts of money between accounts.
- Ask for an updated letter tailored to a specific offer price if your agent suggests it.
Sources
- CFPB: What’s the difference between a prequalification letter and a preapproval letter? ↗
- CFPB: What happens when a mortgage lender checks my credit? ↗
This article is general education, not a loan offer, preapproval, or commitment to lend. Approval depends on credit, income, assets, property, and program guidelines. Not all applicants will qualify.