Almost every prospective homebuyer has searched the phrase “Mortgage, how much can I afford?” when beginning their home search. Buying a home is a significant financial decision, and determining affordability is a crucial first step. One of the best ways to answer this question and gain a clear picture of your buying power is to get pre-approved for a mortgage. This process helps you establish a realistic budget for your home purchase and makes your house-hunting journey smoother and more efficient.


Mortgage How Much Can I Afford? Get Preapproved to Find Out

Pre-approval is a process where a lender reviews your financial situation and determines how much money they will lend you for a mortgage. It involves a thorough review of your credit history, income, assets, and debt. Once pre-approved, you’ll receive a letter specifying the loan amount you qualify for. This letter is a powerful tool in home-buying as it shows sellers that you are a serious and financially capable buyer.

Pre-approval helps you establish a realistic budget for your home purchase. It takes the guesswork out of house hunting and lets you focus on properties within your price range. A mortgage pre-approval letter also allows you to:

  • Shop with Confidence: A pre-approval letter gives you confidence when making offers, knowing you have the financial backing to complete the purchase. In competitive markets, sellers are more likely to accept offers from pre-approved buyers.
  • Strengthens Your Offer: Sellers prefer pre-approved buyers because it demonstrates a commitment to the purchase and reduces the risk of financing issues derailing the deal.
  • Understanding Loan Costs: Working with a lender during the pre-approval process helps you understand the costs associated with different loan products, such as lender origination fees, interest rates, and annual percentage rates (APRs).
  • Identify Potential Issues: Pre-approval can uncover potential issues with your credit history or financial situation, giving you time to address them before making an offer.

How to Get Pre-Approved

  1. Gather Your Financial Documents: Lenders require extensive documentation to assess your financial health. This includes:
  • Identification: Driver’s license, passport, or other state- or federal-issued ID.
  • Income Verification: Pay stubs for the last 30 days, the last two federal tax returns, and the last two W-2s or 1099s.
  • Proof of Additional Income: If applicable, documentation for sources like second jobs, Social Security, or alimony.
  • Bank Statements: The last two statements on all bank accounts, including all pages.
  • Investment and Retirement Account Statements: For the most recent two to four months.
  • Debt Information: Credit card and loan statements.
  • Settlement statements from previous home sales, recent mortgage statements, and proof of insurance for all properties you own.
  1. Find a Lender: You can choose a bank, credit union, or mortgage broker. Shop around and compare interest rates, loan terms, and fees to find the best option for you.
  2. Complete the Application: The lender will provide a mortgage application that requires detailed information about your income, assets, debts, and employment history.
  3. Authorize a Credit Check: The lender will pull your credit report to assess your creditworthiness.
  4. Wait for the Decision: The lender will review your application and documents to make a decision on your pre-approval.

Key Financial Factors Influencing Pre-Approval

Several factors are considered when lenders determine your pre-approval amount. Understanding these factors can help you improve your chances of being approved for the loan amount you need.

  • Credit Score: A good credit score demonstrates your ability to manage debt responsibly. Higher credit scores often lead to lower interest rates and better loan terms.
  • Debt-to-Income Ratio (DTI): This ratio measures the percentage of your gross monthly income that goes towards debt payments. A lower DTI indicates to lenders that you have more room in your budget to afford mortgage payments. Most lenders prefer a DTI of 36% or lower.
  • Income: Your income stability and amount play a significant role in pre-approval. Lenders want to ensure you have a consistent income stream to repay the mortgage.
  • Down Payment: A larger down payment can lower your loan amount, reduce your monthly payments, and potentially eliminate the need for mortgage insurance.
  • Assets: Having liquid assets, such as savings, investments, and retirement funds, demonstrates financial stability and the ability to handle unexpected expenses.

After You Get Your Mortgage Pre-Approval

Once you’re pre-approved, you can start house hunting with confidence. You’ll have a clear idea of how much you can afford, making your search more focused and efficient. Remember that pre-approval is not a guarantee of final loan approval. You’ll still need to go through the full underwriting process once you find a home and make an offer.

Getting pre-approved for a mortgage is a crucial step in the home-buying process. It empowers you to understand your financial capacity, shop with confidence, and present yourself as a serious buyer to sellers. By taking the time to get pre-approved, you’ll be well-positioned to navigate the real estate market and achieve your dream of homeownership.


With our experience and connections in the real estate market, we can help you answer the question “Mortgage, how much can I afford?” and find the right resources. Contact Dickson Realty today and connect with our trusted financing partner, Omega Mortgage Group.