Getting pre-approved

← The Arizona Buyer's Guide

Before you tour a single house, get your financing sorted. In a market like Greater Phoenix, a clean pre-approval is what turns a nice offer into one a seller takes seriously — and it tells you, honestly, what you can afford before you fall in love with something you can't.

This chapter walks through how the front end of a home purchase works: the paperwork, the loan options, and the small differences that decide whether your offer gets a call back.

Pre-qualification vs. pre-approval

People use these terms interchangeably, but they aren't the same thing, and the gap matters when you write an offer.

• Pre-qualification is a quick estimate. You tell a lender your income, debts, and rough credit picture, and they give you a ballpark of what you might borrow. Nothing is verified. It's useful for early planning, but it carries little weight with a seller.
• Pre-approval is the real thing. The lender pulls your credit, collects documentation, and issues a letter stating how much they're prepared to lend, subject to a property and final underwriting. This is the letter that goes with your offer.

Some lenders now offer what they call "fully underwritten" or "verified" pre-approvals, where an underwriter reviews your file up front. Those are the strongest of all — in a competitive situation they can put you nearly on par with a cash buyer on the seller's side of the table.

What lenders actually review

Underwriting comes down to four buckets. Understanding them helps you fix problems before they cost you a house.

Credit

Your credit score and history shape both your approval and your interest rate. Lenders look at your score, your payment history, how much of your available credit you're using, and any recent negative events. You don't need perfect credit — plenty of solid loans close with mid-range scores — but the higher your score, the better your rate tends to be. If your credit needs work, that's a reason to start this process early rather than late.

Debt-to-income (DTI)

This is the number that surprises buyers most. Lenders add up your monthly debt payments — the future mortgage, car loans, student loans, minimum credit-card payments, and here in Arizona, the HOA dues on the home you're buying — and divide by your gross monthly income. Many conventional loans look for a total DTI at or below roughly 43–50%, though the exact ceiling depends on the loan program and the strength of the rest of your file. If you're close to the edge, paying down a card or two can meaningfully raise your buying power.

Assets

The lender verifies you have the money for your down payment and closing costs, plus some reserves. They'll ask for bank and investment statements and will want to see that large deposits are documented — a "paper trail" on gift funds or transfers. Move your down-payment money into one account and leave it there before you start; unexplained deposits slow underwriting down.

Employment & income

Lenders want stable, documentable income. For W-2 earners that's pay stubs, W-2s, and often a verbal verification of employment right before closing. If you're self-employed or commission-based, expect to provide two years of tax returns and to have your income averaged. Don't change jobs mid-transaction if you can avoid it — a new job, especially in a new field, can pause an approval.

Loan types, in plain terms

Which loan fits depends on your down payment, credit, service history, and the price point. A good local lender will lay out the trade-offs, but here's the landscape.

A couple of notes. On conventional loans below 20% down, you'll usually carry private mortgage insurance (PMI) until you reach enough equity — but it drops off, unlike FHA's mortgage insurance, which often stays for the life of the loan. VA loans are genuinely excellent for those who qualify: no down payment and no monthly mortgage insurance. And in the Valley's luxury markets, once a price crosses the local conforming loan limit, you're into jumbo territory, which has stricter reserve and credit requirements.

Rate locks

Interest rates move daily. A rate lock freezes your quoted rate for a set window — commonly 30, 45, or 60 days — so a jump in the market between contract and closing doesn't change your payment. Locks are usually tied to a specific property and closing date, so most buyers lock once they're under contract, not before. If your closing runs long, ask your lender about extension costs. Some lenders also offer "float-down" options that let you capture a lower rate if the market improves after you lock; ask whether that's available and what it costs.

How a strong pre-approval helps your offer

When I present your offer, the pre-approval letter goes with it. A strong one does three things: it tells the seller your financing is real, it shows the lender has verified the numbers, and it can be tailored to the exact offer price so you're not tipping your hand on your ceiling. In a multiple-offer situation, that credibility can matter as much as coming in a few thousand dollars higher — a seller would rather take a slightly lower offer that's certain to close than a higher one that might collapse in underwriting.

Common questions