There is a lot that goes into the process of buying a home beyond picking a property and making a payment. To begin with, the down payment alone usually has to be saved up for. Once there’s a down payment that’s ready, another step is to look into mortgage options.

A key step in the process is getting a preapproval for a mortgage. Let’s explore why it’s so crucial below:

Mortgage Preapproval

Before you apply for a mortgage, you can get preapproval. This evaluates your creditworthiness in advance; it does not guarantee or reserve a mortgage or loan, but it will help you to secure a better interest rate and a lower monthly payment. Preapproval is based on your credit report, demonstrated income, and liquid assets such as money in a bank account. Once preapproved, you’ll receive a letter. This indicates that the lender has verified your information and outlines the exact amount it would lend to you and for how long.

Many people tend to confuse this with mortgage prequalification. In truth, those are two different things. Prequalification comes before preapproval: it’s an estimate of what the buyer can afford without going too in-depth into his or her credit and whatnot.

Mortgage preapproval is a great way to go about buying a home. Sellers will then be able to take the buyer more seriously. It’s also common for sellers to prioritize offers with a preapproval attached.

Application for mortgage preapproval includes an assessment of your financial health. Lenders will typically take a deep look into your financial records. That way, they can offer an accurate price range for the home loan within a realistically affordable range.

It’s necessary to prepare financial records such as:

  • 401(k) retirement savings records
  • Bank accounts
  • Credit card debt details
  • Credit reports
  • Other financial obligations
  • Pay stubs
  • Records on assets like stocks and bonds
  • Student loan debt details
  • Tax records

The assigned load officer will take a deep dive into overall finances that includes assets, credit history, debt and income. It plays a key role in determining debt-to-income ratio, helping the bank determine what level of mortgage is affordable in terms of monthly payments. 

What Makes the Mortgage Preapproval Letter Necessary?

A dated letter will be issued by the lender when you get preapproved for a mortgage. It will have the preapproved loan amounts indicated, highlighting the loan’s terms and conditions. A preapproval letter comes with several advantages, such as:

  • Fast-tracks mortgage application (due to direct access of underwriters to lenders)
  • Gives an advantage over other buyers without a preapproval letter
  • Highlights likelihood of mortgage approval
  • Proof of your finances being in good shape
  • Shows the seller that there’s a lender willing to work with you
  • Validates your ability to afford the property


Mortgage preapproval is a crucial part of buying a home. It is an advanced evaluation of creditworthiness which, when attained, will make the process of buying of a home much smoother. A mortgage preapproval letter has several benefits such as validating the ability to afford the home, highlighting the likelihood of mortgage approval and giving an advantage over other buyers.

Trying to find mortgage lenders in Santa Ana? Contact NetLending today! We’re a top wholesale mortgage broker and a one-stop-shop for finding the right mortgage quickly.