One of the biggest challenges in buying a home is applying and getting approval for a housing loan. It involves reexamining your financial capability and providing the documents and details required. While this may seem simple, the processes involved are often complex and frustrating.

A preapproval letter can give you an advantage in your journey to your dream home. It ensures sellers that you can afford the house with no issues.

Let us guide you on why it’s essential and how it will speed up the whole process. Read on to learn more.

The Preapproval Letter and Its Importance in Home Mortgages

A preapproval letter is a pre-guarantee that shows you the maximum loan or mortgage amount you can borrow from a financial institution. The letter is a priority document along with your supporting requirements. It confirms your complete loan details and the total amount loanable and is an authorized qualification for the mortgage from the lender who provided it.

Upon issue, it is valid anywhere from 60 to 90 days. It is different from prequalification, which only discloses your financial capability with a lending company to get your loan estimate for a housing loan.

Preapproval enables homebuyers to gauge the amount they can commit to for a downpayment and the price range they can afford. It’s a house seller’s initial requirement for financial transparency and speeds up the process. It also makes it easier to choose the right house at the exact budget.

It is best to have it ready before shopping for a new home. You will be able to choose a house with a doable budget that won’t be a potential financial problem or debt trap and also make a purchase from your seller right away.

Requirements for Getting a Preapproval Letter

The following documents are needed to lessen risks to the bank or financial institution that will handle your housing loan. They make sure you can complete the mortgage process and not fall out of installment arrangements.

  • Confirming Your Credit Score

    The current credit score for mortgage qualification is at least a 620 FICO score. Some lenders hover around this figure depending on the terms outlined in your preapproval letter. Due to current economic times, many lenders ask for higher, going as high as a 700 ceiling credit score with a 20 percent down payment on a housing loan.

    A lender checking your credit score causes a hard inquiry, and your score will take a hit with up to a five-point decrease. It’s important to choose your lender beforehand to keep hard inquiries to a minimum and to choose the most fitting lender with the best terms for you.

  • Your Proof of Income Statement and Assets

    Your lender requires the following incoming financial documents to arrive at a decision and get the mortgage amount posted to your preapproval letter:

    • W-2 wage statements for the last two years
    • Recent pay stubs, including overtime, bonuses, and commissions
    • Other income including rental, dividends, child support, alimony 
    • Tax returns from the last two years


  • Employment Verification

    Proof of income goes hand in hand with confirming your employment. Both these requirements show your financial capability and that you can follow through with your payment arrangements.

    In addition to employment documents, lenders may contact your employers to confirm details and other needed information. It’s a guarantee that the mortgage won’t get derailed and avoid causing financial problems for the lender, the seller, and you as the buyer. 

  • Identification Documents

    Additional supporting documents are also required to confirm identity and complete the process for a preapproval letter. These are your driver’s license, Social Security number, your signature to authorize the credit report request, and a copy of your property tax bill if you own another home or property. Have them ready to avoid delays in the final steps.

Secure Your Preapproval Letter for Your Dream House Today

These economic times have prompted many house sellers, banks, and lenders to require a preapproval letter first before approving applications and accepting offers. As an authorized qualification from the lending party that proves your financial capability, it preempts possible financial issues that can affect everyone involved in the loan, including you.

Don’t let minor issues get in the way of acquiring your dream house. Get the preapproval letter today and apply for the housing loan with us before someone else buys it. Cal Coast Funding is a premiere mortgage lender in San Diego, and we pride ourselves on offering competitive rates and outstanding service.