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FAQ: Why loan pre-approval matters for home buyers

Today is the day!If you’re planning to buy a home, getting pre-approved for a loan is one of the first actions that everyone – from your real estate agent to online home-buying guides – will advise you to do.

Let’s dig deeper into what this step entails:

What is loan pre-approval?

Pre-approval is the process of applying for a loan, having lenders evaluate personal and financial documents, and consulting with a lender to determine a specific mortgage amount.

Why does everyone recommend getting pre-approved early?

Getting pre-approved early in the process gives buyers crucial advantages like:

  1. Knowing how much money they can spend on a home. This helps you narrow down your options.
  2. Getting a clear idea of the interest rate that a home loan might come with and, in some cases, being able to secure a specific interest rate.
  3. Giving sellers the confidence that buyer is serious and has the legitimate capacity to afford the property.
  4. Getting an early warning in case your pre-approved mortgage amount falls below your target or expectations. This gives you time to plan contingencies for your home purchase – whether it’s to pursue actions that will improve your credit scores, save up for a larger down payment, use a co-signer, or simply to reevaluate your home-buying targets.

Can I buy a home without getting a loan pre-approval?

Yes. But you lose the important advantages noted above. Expect the home-buying process to proceed at a much slower pace. You also risk losing your targeted property to competing buyers who can present proof of their buying capacity to the seller.

Am I required to borrow money right away?

No. You are not obligated to borrow any amount, even if the lender considers your financial credentials adequate for a loan. You are simply obtaining information about your purchasing and bargaining power.

How long is my pre-approval valid?

The validity of a loan pre-approval varies per lender, typically between 3 and 6 months. The pre-approval letter that your lender will provide you should specify an expiry date.

It’s best to make an offer as soon as you receive the letter, so that you can avoid needing to apply for a new one in case negotiations take longer than expected.

What documents should I prepare for a loan pre-approval application?

Pre-approval requirements vary per lender and buyer circumstances, but general examples include validation for the following credentials:


  • Income


  • Recent pay stubs
  • 2 to 3 years of federal tax returns
  • 2 years of W-2 statements
  • Proof of alimony and other additional income sources


  • Assets


  • Bank statements
  • Investment account statements
  • Notarized gift letters, if you are receiving assistance for the down payment from friends or relatives


  • Employment
  • Certificate of employment
  • Pay stubs
  • Employer or manager contact details, including former employer contacts for buyers who recently changed jobs



  • Good credit scores



  • Personal identification


  • Driver’s license
  • State ID card
  • Social Security number

Read more about loan preapproval and other steps in real estate financing here.For more information on North Carolina real estate for sale, especially luxury homes for sale in Charlotte, Cornelius, and Lake Norman, call David Dunn at 704-999-3591 or email