Why Mortgage Pre-Approval Is So Important for Bay Area Home Buyers

This guide explains what it means to be “pre-approved” by a lender, how the process works, and how it can benefit you when buying a house in the San Francisco Bay Area.

1. Mortgage pre-approval is especially important in the Bay Area due to the highly competitive housing market.
2. Being pre-approved makes you a more attractive buyer and can improve your chances of getting an offer accepted.
3. Pre-approval helps you understand how much house you can afford and focus your search accordingly.
4. The process involves a lender reviewing your financial situation and documents like tax returns, bank statements, and proof of income.
5. Pre-approval can streamline the closing process and prevent delays—just avoid big financial changes between pre-approval and final approval.

What Is a Mortgage “Pre-Approval” Exactly?

A mortgage pre-approval is exactly what it sounds like. It’s a form of financial pre-screening, conducted by a mortgage lender or broker, to determine how much a person can borrow toward a home purchase.

It also helps to determine if a person is qualified to take on a mortgage loan, based on their income, credit score, and other factors. So it serves two important purposes.

You might have also encountered the term “pre-qualification” in your research. While they sound the same, there’s actually an important distinction. Here’s what you should know:

• Mortgage Pre-Qualification: An initial estimate of how much a borrower might be able to borrow, based on self-reported financial information. It’s a quick, informal process that gives a general idea of loan eligibility but does not involve a credit check or document verification.
• Mortgage Pre-Approval: A more formal process where a lender reviews the borrower’s credit report, income, assets, and debts to determine how much they are willing to lend. It results in a written letter and shows sellers that the buyer is financially qualified to make an offer.

Benefits for Bay Area Home Buyers

Buying a home in California’s Bay Area region can be tricky, especially when supply levels run low.

In recent years, the number of buyers in the market has exceeded the supply of homes. This kind of imbalance makes the housing market more competitive.

That’s one of the reasons why home buyers can benefit from mortgage pre-approval. It can help you compete in a fast-moving real estate market.

Here’s a more complete list of mortgage pre-approval benefits:

• Being pre-approved can make sellers more inclined to accept your offer.
• A pre-approval letter shows sellers that you have your financing squared away.
• It can help you determine how much house you can afford to buy.
• Pre-approval allows you to target your home search to a specific price range.
• It can also give you a head start on your closing, to prevent unwanted delays.

How the Pre-Approval Process Works

The mortgage pre-approval process can vary due to a number of factors, including the lender’s business practices and procedures. But it usually follows the same basic sequence.

In the Bay Area, mortgage pre-approval typically works like this:

1. Research: Compare lenders based on interest rates, fees, loan options, and customer service.
2. Application: Fill out the lender’s pre-approval application online, by phone, or in person. Most lenders use the same standardized form.
3. Documents: You’ll probably have to provide recent pay stubs, W-2s or 1099s, tax returns, bank statements, and a valid photo ID.
4. Credit check: The lender pulls your credit report to review your credit score and history, in order to evaluate the level of risk.
5. Financial review: The mortgage broker or lender will evaluate your income, assets, debts, and employment to determine how much you can borrow.
6. Loan options: Based on your financials, the lender may discuss different loan types and amounts you qualify for.
7. Pre-approval letter: If approved, you’ll get a letter stating how much you can borrow, which you can use when house shopping. It’s usually valid for 60 – 90 days.
8. Making offers: You can share the pre-approval letter with sellers or listing agents to show that you’re a serious, qualified home buyer.

Key Considerations for Home Buyers

Here are some other important points to keep in mind when getting pre-approved for a loan in the Bay Area.

1. Starting this process is fairly easy. You would simply contact a mortgage lender or broker (like us!) and tell them you want to get pre-approved for a loan. You can initiate the process online, over the phone, or by email.
2. During the pre-approval process, the lender will review many aspects of your financial situation. They will likely check your credit score. They will also request some financial documents. This may include your tax returns for the last couple of years, as well as proof of income and recent bank statements.
3. This is your opportunity to ask your lender any questions you have about your mortgage options. For instance, you can inquire about down-payment requirements, types of loans available, or how to lower your interest rate by paying points at closing.
4. If you want to expedite the process, you could start rounding up your financial documents in advance. (Or at least figure out how to obtain them.) Here’s a list of commonly requested documents for a Bay Area mortgage pre-approval.
5. The pre-approval helps you determine how much you can borrow for a home purchase. But it’s not the same as the final approval that comes later, prior to closing.
6. In between these two steps, try to keep your financial situation as “stable” as possible. Try to avoid switching jobs and making major purchases, if possible. Keep those funds in the bank, so you can cover your down payment and closing costs.

Ready to Get Pre-Approved?

Bridgepoint Funding is your Bay Area mortgage company. We’ve been assisting home buyers and homeowners with their financing needs for nearly 20 years.

Our broker-based model gives us access to a wide range of mortgage products and programs. This allows us to find the right loan for each individual client.

Please contact our staff if you’d like to get pre-approved for a home loan in the Bay Area. It’s a great way to begin your home-buying journey, and there’s no better time to start than now.