What You Should Know Before Starting the Mortgage Pre-Approval Process
Getting pre-approved is a necessary first step in the homebuying process. It does two important things: it shows you how much home you can realistically afford and signals to sellers that you're a serious buyer. Without a pre-approval letter, you may not be able to make a credible offer. Pre-approval helps you shop with purpose, avoid disappointment, and move quickly when the right property comes along.
What Lenders Look at During Pre-Approval
When you apply for mortgage pre-approval, credit unions, banks, and other lenders evaluate your overall financial health. They make their determination by considering your:
Credit Score – This helps determine your creditworthiness and influences the rate you’ll be offered. Most lenders prefer a score of 620 or higher, though higher scores often mean lower interest rates.
Debt-to-Income Ratio (DTI) – Lenders calculate how much of your income goes toward existing debts. A DTI under 43% is typically preferred.
Income and Employment – Stable income and consistent employment history help demonstrate your ability to make future mortgage payments.
Assets and Savings – Lenders want to see that you have enough in savings for a down payment and closing costs, and possibly some reserves for emergencies.
Loan Type and Down Payment – The amount you plan to put down and the type of mortgage you’re applying for also affect your approval and interest rate.
Types of Loans to Consider
Because loan type can play a role in your pre-approval process, you’ll need to decide what type of loan you want early in the process. You can change loan types before making an offer, but doing so will trigger a reassessment of your qualifications.
Although it is sometimes possible to change the loan type after an offer has been accepted but before the loan has been finalized, it can complicate the process, like requiring an addendum and the seller’s written agreement.
Typically, doing your research and making your choice at the pre-approval stage can save you from headaches later on. Some of the home loan types available from Ouachita Valley FCU include:
Conventional Loans – These are the most common and are ideal for borrowers with strong credit and savings.
FHA Loans – Designed for borrowers with lower credit scores or smaller down payments.
VA Loans – Available to eligible veterans and active-duty service members, often requiring no down payment.
USDA Loans – Aimed at rural homebuyers who meet certain income requirements.
Not every lender offers all these types of loans. Before you begin down the pre-approval path with a lender, you should confirm they are offering the type of loan you want. An experienced mortgage professional can walk you through your options, explain which loans you qualify for, and help you make an educated decision.
Documents You’ll Need
To get pre-approved, you’ll need to provide:
Proof of income (recent pay stubs, W-2s, or tax returns)
Proof of assets (bank statements, retirement, or investment accounts)
Identification (driver’s license, Social Security number)
Information on current debts (credit card balances, auto loans, student loans)
Having these ready can help the process go more smoothly.
Steps to Take Before You Apply
Before starting your pre-approval application, there are some things you can do to boost your chances of approval and potentially secure a better rate:
Check your credit report for errors and dispute anything that’s inaccurate.
Pay down high-interest debts, especially credit cards.
Avoid new lines of credit, which can temporarily ding your score.
Gather financial documents ahead of time so you’re not scrambling to find paperwork.
Build your savings to cover both the down payment and unexpected expenses that may come up during the buying process.
Should You Wait to Improve Your Credit, Build Your Savings, or for Rates to Drop?
It’s a question many homebuyers wrestle with, and there are often tradeoffs no matter what you decide.
Improving your credit score can help you qualify for a lower interest rate, which may reduce your monthly payment and the total cost of the loan. However, building credit takes time, and waiting too long could mean missing out on homes that fit your needs and budget today.
Some buyers hope that rates will drop in the near future. While lower rates can certainly lead to long-term savings, it’s difficult to predict when, or if, that will happen. Economic conditions shift, and rates could just as easily rise. In the meantime, home prices may climb or inventory could tighten, making it harder to find a home you like and can afford.
It can be easy to fall into the trap of waiting indefinitely for the perfect moment. Doing so can result in you missing your chance, since it’s hard to predict whether you’ll be in a better position in six months or a year. This can be particularly problematic if high rents, cramped quarters, or being stuck in rentals is negatively affecting your quality of life or future plans.
Sometimes it’s best to just take the plunge and start the process. Applicants should also remember that pre-approval does not lock you into a mortgage and buying a home. You don’t have to follow through if things change and it turns out now is not the right time.
Why Pre-Approval Matters for Monroe, West Monroe, and Greater Ouachita Parish Homebuyers
Pre-approval isn’t a guarantee, because lenders still do a final check of your financials before finalizing the loan. As long as your financial situation doesn’t change dramatically (i.e. you don’t take out new loans or lose your job), pre-approval typically will lead to home loan approval.
Mortgage pre-approval is the most intrusive step of the whole home loan application process, but it can also be a relief to get the hard part out of the way before you start seriously shopping for homes.
One of the benefits of working with a credit union is the gentler, more customer-focused loan process. Unlike private mortgage companies or big national banks, credit unions know their members, are familiar with their financial situation, and are committed to helping them reach their homeownership goals.
Northeast Louisiana residents who prefer a personal approach that takes into account more than just their credit score should contact Ouachita Valley FCU.
