How to Prequalify for a Mortgage Loan

Prequalifying for a mortgage loan is one step toward buying a house.

Prequalifying for a mortgage loan is one step toward buying a house.

Prequalification can give you an edge when you go to apply for a home mortgage loan. Lenders usually don’t charge any fees to prequalify you, although the process is similar to the loan application process. There are several advantages of prequalification, including giving you an estimate of how much money you can borrow to purchase a home. Another benefit is that you can expedite closing when you find a house to buy because you will already have completed some of the steps.

Items you will need

  • Credit report
  • W-2 forms
  • Tax returns
  • Bank statements
  • Recent pay stubs

Go online to use a mortgage prequalification calculator before talking to a lender (see Resources). This will give you some idea of how much mortgage you can afford. Provide information about your credit history, income, assets and debts. The calculator may also ask you to enter the percentage rate and loan term that you want, in addition to how much money you will have to make a down payment. The figure you receive may be less than what some lenders will give you, but it should give you an estimate of an amount that you can afford to repay.

Calculate your debt-to-income ratio. This is how much money you owe for housing costs, credit cards, car payments and other debts in relation to your gross income before taxes are taken out. According to Bank of America, most lenders won’t want to see your debt exceeding 36 percent of your total monthly gross income (see Reference 3).

Order your free annual credit report several months before you actually go house hunting. You can request a report from each of the three major credit-reporting bureaus (see Resources). Check each report carefully for errors. Give yourself plenty of time to dispute any inaccuracies listed on your report or to correct any credit problems.

Get prequalified with more than one lender. Since you are under no obligation to borrow from a specific lender, you will want to compare rates in order to find yourself the best deal. You might want to start with the bank or credit union where you do your normal banking. If you aren’t offered the interest rate you want, it pays to shop around.

Gather together the financial documents you will need when you approach a lender to request a prequalification letter. Assemble several months’ worth of bank statements, recent pay stubs, W-2 forms and tax returns for the past two years, as well as other financial documents relating to any assets or investment accounts you may have.

Fill out the prequalification application completely and accurately. At this point, the lender may or may not verify the information you provide. Usually, you will know if you prequalify within a few minutes. Many lenders will even prequalify you on the telephone. The lender will then provide you with a prequalification letter stating that you have been prequalified for a home loan in the amount indicated on the letter.


  • Prequalification does not commit you to financing your home through that particular lender, nor does it guarantee that you will get the mortgage loan you want. Sometimes a lender will do further checking into your credit history, so if it finds something negative it missed before, you could still be turned down for your loan.

About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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