Getting Preapproved for a Mortgage in Mid-Michigan: What Lenders Look At and How to Get Ready

If you're thinking about buying a home this winter or next spring, the best first step usually isn't scrolling listings. It's talking to a lender and getting a preapproval letter. A preapproval tells you what price range makes sense, and it shows sellers you're a serious buyer when you make an offer.

Whether you're shopping in Fenton, Grand Blanc, Flint, Davison, Flushing, Linden, Holly, Swartz Creek, or anywhere else in Genesee County and the surrounding areas, here's what a preapproval is, what lenders look at, and how to get ready.

Prequalification vs. Preapproval: Don't Get Hung Up on the Words

You'll hear both terms. According to the Consumer Financial Protection Bureau (CFPB), both are letters saying a lender is generally willing to lend to you up to a certain amount, based on certain assumptions. Lenders use the words differently. Some give a "prequalification" based on information you report without checking it, and save "preapproval" for when they've verified your income, assets, and credit (CFPB: Prequalification vs. Preapproval).

Neither one is a guaranteed loan offer. What matters is how thoroughly the lender reviewed your information. A letter backed by verified documents carries more weight with sellers, and I can tell you what sellers and listing agents in our area tend to take seriously.

Why Get Preapproved Early

• You'll know your budget. It's much easier to fall in love with the right house when you know your range.
• Your offer will be stronger. Sellers want confidence that you can get financing. A preapproval letter helps give them that.
• You'll catch problems in time to fix them. The CFPB points out that getting preapproved earlier can help you spot credit issues while there's still time to correct them.

What Lenders Look At

1. Your credit

Lenders will check your credit report and scores. Before you apply, check your own reports. You can get free credit reports from Equifax, Experian, and TransUnion every week at AnnualCreditReport.com, the only site authorized by federal law for this, and checking your own report doesn't affect your scores. If you find a mistake, you can dispute it for free (AnnualCreditReport.com).

2. Your income and debts (your debt-to-income ratio)

Your debt-to-income ratio, or DTI, is your total monthly debt payments divided by your gross monthly income (before taxes). The CFPB's example: if your mortgage would be $1,500 a month, you have a $100 car payment and $400 in other debts, that's $2,000 a month. On a $6,000 gross monthly income, your DTI is 33%. Different loan programs and lenders have different DTI limits, so ask each lender what applies to you (CFPB: What Is a Debt-to-Income Ratio?).

3. Your savings and where your down payment comes from

Lenders want to see that you have the money for your down payment and closing costs, and where it came from. If a family member is giving you part of it, you'll typically need a signed gift letter. If you need help with the down payment, read my post on MSHDA down payment assistance.

Your Preapproval Document Checklist

The CFPB suggests gathering these ahead of time (CFPB: Create a Loan Application Packet):

• Pay stubs for the last 30 days
• W-2 forms for the last two years
• Signed federal tax returns for the last two years
• Documentation of any other income
• Your two most recent bank statements (every page, even the "intentionally left blank" ones)
• Statements showing at least two months of history for the accounts holding your down payment, plus a signed gift letter if some of it is a gift
• Documentation of a recent name change, if any
• Photo ID and your Social Security number
• Your homebuyer education certificate, if you have one

Veterans and servicemembers considering a VA loan will also need a certificate of eligibility from the VA. If you're self-employed or have irregular income, expect to need more paperwork, so ask your loan officer early. And plan on updating your statements and pay stubs at least once, because lenders like to see the most recent ones.

Shop Around Without Worrying About Your Credit

A lot of buyers talk to only one lender because they're worried multiple credit checks will hurt their score. Here's the good news from the CFPB: within a 45-day window, multiple credit checks from mortgage lenders are recorded as a single inquiry. You can get several preapprovals and official Loan Estimates and compare them (CFPB: What Happens When a Mortgage Lender Checks My Credit?).

Once you have Loan Estimates, my post on buyer closing costs and the Loan Estimate walks through how to compare them line by line.

After You're Preapproved: Don't Rock the Boat

Your preapproval is based on your finances at that moment. Between now and closing, try to keep things steady. The CFPB recommends avoiding new credit cards, car loans, or other credit right before or during the mortgage process, since each new application adds an inquiry that can lower your scores. It's also smart to check with your lender before changing jobs, moving large sums of money between accounts, or making a big purchase.

Also remember that a preapproval isn't the final loan approval. After your offer is accepted, the lender still reviews the specific home, including the appraisal, and finalizes underwriting (CFPB: Closing on Your New Home).

This post is general information, not legal, tax, or financial advice. Your lender or a HUD-approved housing counselor can speak to your specific situation.

Ready to Start Your Home Search?

I'm happy to connect you with local lenders, help you understand your preapproval, and start setting up a search that fits your budget, anywhere in Genesee County or nearby Lapeer, Livingston, and Oakland counties. Call or text me at (810) 962-4908 to get started.