A lot of buyers think looking at homes online is step one. It’s not. The real first step is figuring out what you can actually borrow, and that means getting preapproved, not just prequalified.
Those two words get used like they mean the same thing. They don’t. Prequalification is a quick estimate based on what you tell a lender, checked with a soft credit pull that doesn’t affect your score. It’s a fine starting point, but it isn’t something a seller will take seriously.
Preapproval is the real version. A lender pulls your actual credit, reviews your documents, and gives you a letter stating the loan amount, rate, and terms you actually qualify for. That’s the document that makes an offer mean something.
To get there, you’ll need to send a lender your last two years of W-2s or tax returns, recent pay stubs, a couple months of bank statements, and a valid ID. If you’re self-employed, plan on showing two years of tax returns plus a year-to-date profit and loss statement. If part of your down payment is a gift from family, you’ll also need a short letter from them confirming it’s a gift, not a loan.
Most lenders want to see a credit score of at least 620, though a higher score gets you a better rate. They’ll also look at your debt-to-income ratio, basically your monthly debts divided by your monthly income. Keeping that under 36 percent puts you in a stronger position, even though some loans allow more.
If you’re a W-2 employee with straightforward finances and your paperwork ready to go, preapproval can happen in a day or two. Self-employed income or anything more complicated usually takes three to five business days. Missing documents can stretch that to a week or two, which is the main reason it’s worth gathering everything before you start.
Once you have it, that letter is typically good for 30 to 60 days, so timing matters. In a market like Ann Arbor or Ypsilanti, where well-priced homes can get multiple offers fast, having that letter ready before you start touring is what lets you actually compete when the right one shows up. Sellers and their agents notice which offers come backed by real preapproval and which ones don’t.
One thing to watch after you’re preapproved: don’t open new credit cards, finance a car, make a big unexplained cash deposit, or change jobs before closing. Any of those can change the numbers a lender already approved and slow things down right when you don’t want delays.
Getting preapproved isn’t complicated once you know what’s actually being asked of you. If you want a referral to a lender or just want to walk through what to gather first, I’m happy to help.
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