How Many Mortgage Preapprovals Should I Get?

Buying a home is one of the most significant financial decisions you'll ever make, and getting preapproved for a mortgage is a crucial step in the process. But how many preapprovals should you get? The answer isn't one-size-fits-all – it depends on your unique circumstances and goals. In this article, we'll explore the factors to consider and provide practical advice to help you navigate this important decision.

Understanding Mortgage Preapprovals

Before we dive into the nitty-gritty, let's first understand what a mortgage preapproval is and why it's important.

A mortgage preapproval is a conditional commitment from a lender that states how much they're willing to lend you based on your financial situation. It's a valuable tool that can give you a competitive edge when making an offer on a home, as it shows sellers that you're a serious and creditworthy buyer.

Factors to Consider

When deciding how many mortgage preapprovals to get, here are some factors to keep in mind:

1. Your Credit Score

Your credit score is one of the most crucial factors that lenders consider when evaluating your mortgage application. If your credit score is excellent (say, 760 or higher), you may only need to get one or two preapprovals, as lenders are likely to offer you their best rates and terms.

However, if your credit score is on the lower end (below 670), it might be wise to get preapprovals from multiple lenders. This way, you can compare offers and potentially find a lender that's willing to work with you despite your less-than-perfect credit.

2. Your Employment Situation

Lenders want to ensure that you have a stable source of income to make your mortgage payments. If you have a steady, well-paying job with a long employment history, getting one or two preapprovals may suffice.

However, if you're self-employed, have a variable income, or have recently changed jobs, you may want to get more preapprovals. Different lenders have different criteria for evaluating self-employment or variable income, so having multiple preapprovals can increase your chances of finding a lender that's a good fit.

3. Your Down Payment Amount

The size of your down payment can also influence how many preapprovals you should get. If you're able to put down a larger down payment (say, 20% or more), you may be seen as a lower-risk borrower, and one or two preapprovals could be sufficient.

However, if you're planning to make a smaller down payment (less than 20%), you may want to explore more options. Some lenders may be more lenient with lower down payments than others, so having multiple preapprovals can help you find the best deal.

4. Your Home Buying Timeline

If you're in a hurry to buy a home and need to move quickly, getting multiple preapprovals can be beneficial. Having several preapproval letters in hand can make you a more attractive buyer and potentially give you an edge in a competitive market.

On the other hand, if you have a more flexible timeline and aren't in a rush, you may be able to get away with fewer preapprovals, as you'll have more time to shop around and compare offers.

Tips for Getting Mortgage Preapprovals

Now that you have a better understanding of the factors to consider, here are some tips for getting mortgage preapprovals:

1. Shop around: Don't just go with the first lender you come across. Compare rates, fees, and terms from multiple lenders to ensure you're getting the best deal.

2. Gather your documents: Lenders will need to verify your income, assets, and credit history, so have your financial documents (pay stubs, tax returns, bank statements, etc.) ready to go.

3. Check your credit report: Review your credit report and dispute any errors or inaccuracies before applying for preapprovals. This can help you get the best rates and terms.

4. Limit credit inquiries: While shopping around is essential, try to limit the number of hard credit inquiries, as too many can negatively impact your credit score.

5. Be honest: Provide accurate and complete information to lenders. Lying or omitting information can lead to your preapproval being denied or revoked.

6. Consider local lenders: In addition to national banks and online lenders, consider getting preapprovals from local lenders, as they may have a better understanding of the local housing market and offer more personalized service.

Conclusion

There's no one-size-fits-all answer to how many mortgage preapprovals you should get. The ideal number will depend on your unique circumstances, such as your credit score, employment situation, down payment amount, and home buying timeline.

As a general rule of thumb, it's a good idea to get at least two or three preapprovals from reputable lenders. This gives you a range of options to compare and increases your chances of finding the best deal.

However, if you have excellent credit, a stable income, and a substantial down payment, one or two preapprovals may be sufficient. Conversely, if you have a more complicated financial situation or are in a highly competitive housing market, you may want to consider getting four or more preapprovals.

Ultimately, the key is to strike a balance between getting enough preapprovals to find the best deal and limiting the number of hard credit inquiries to protect your credit score. By carefully considering the factors outlined in this article and following the tips provided, you'll be well-equipped to navigate the mortgage preapproval process and find the right home loan for your needs.