Before you tour a single house, talk to a lender. Knowing your real buying power — not a website estimate — is what makes the rest of the process work.
Pre-qualification vs. pre-approval
These are not the same thing, though people use them interchangeably.
Pre-qualification is a back-of-envelope conversation. You tell a lender about your income, debts, and savings; they tell you roughly what you might qualify for. No documents are verified.
Pre-approval is the real deal. You submit pay stubs, tax returns, bank statements, and identification. The lender pulls credit and runs your file through underwriting guidelines. The output is a pre-approval letter stating a specific loan amount they're willing to lend, contingent on the property and final underwriting.
Sellers want to see pre-approval. In a competitive offer situation, a strong pre-approval letter from a known local lender is taken much more seriously than a generic online one.
What lenders actually look at
- Credit score and history. Score affects which loan programs you qualify for and what interest rate you get. Most conventional loans want 620+; better rates start around 740+.
- Debt-to-income ratio (DTI). Your monthly debt payments divided by gross monthly income. Most programs cap this around 43–50%, though it varies.
- Income stability. Two years of consistent income history is the baseline. Self-employed buyers usually need two years of tax returns.
- Down payment and reserves. What you've saved, and where it's been sitting. Recent large deposits get flagged and require documentation ("seasoning").
- Employment verification. Lenders confirm employment directly with your employer, often right before closing too.
Loan types you'll hear about
- Conventional — Not government-backed; minimum down payments can be as low as 3% for qualified borrowers. Private mortgage insurance (PMI) typically applies under 20% down.
- FHA — Government-insured, typically 3.5% down with more flexible credit guidelines. Comes with mortgage insurance for the loan's life in most cases.
- VA — For eligible veterans and active service members. Often 0% down, no PMI. Excellent program if you qualify.
- USDA — For eligible rural areas, which in metro Phoenix includes parts of the outer fringes. Income limits apply.
- Jumbo — For loan amounts above conforming limits, which matters for Scottsdale luxury and parts of Arcadia.
Use a lender who knows the Arizona market — ideally local. Out-of-state lenders sometimes miss things like flood irrigation, well-and-septic specifics for outlying areas, or the appraisal patterns in luxury pockets. A local lender with a strong reputation also carries weight in multiple-offer situations.
What you'll need to gather
- Two most recent years of W-2s (and tax returns if self-employed)
- Recent pay stubs (typically last 30 days)
- Two months of bank statements for every account
- Government-issued ID
- For VA: your Certificate of Eligibility (your lender can help pull this)
Once you're pre-approved
Two important habits during the rest of the process:
- Don't open new credit. New cards, car loans, or even credit inquiries can change your DTI and qualifying numbers. Wait until after closing.
- Don't make large undocumented deposits. If money is moving in (gift from family, bonus, sale of an asset), document the source clearly so it doesn't slow underwriting.
- Get pre-approved, not just pre-qualified — sellers can tell the difference.
- Use a local lender with a real Arizona track record.
- Don't touch your credit or your accounts in unusual ways until you close.
Need a lender referral?
I can connect you with lenders I've worked with before, but you're free to use anyone. (See the workbook compliance note: this isn't a required referral.)
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