Credit and approval, explained properly

The three words, and what separates them

• Pre-qualified

  A conversation. You say what you earn and what you owe, and somebody tells you roughly what that might support.

  Useful for orienting yourself. Worth very little to a seller, because nothing has been verified and nobody has looked at your credit.

• Pre-approved

  Your credit has been pulled and your income and assets reviewed. A lender has put in writing what it is prepared to lend, subject to conditions.

  This is the letter an agent asks for before showing you houses, and the one that makes an offer credible. It is not a guarantee — it can still come apart on the appraisal, on a change in your circumstances, or on a condition nobody has met yet.

• Approved

  The full file has been underwritten — income, assets, credit, the property, the title — and the remaining conditions are cleared.

  The end of the process rather than the start of it. Between pre-approval and here, somebody checks everything you said.

What is actually looked at

• Your credit history

  Not only the score. What the score is made of: whether payments arrive on time, how much of your available credit you are using, how long the accounts have been open, and anything that has gone badly wrong and when. Two people with the same score can look very different to an underwriter.

• What you earn, and how steadily

  Stability matters as much as the amount. Salaried income is read differently from commission, self-employment, rental income or a new job in the same line of work. If your income is irregular, that is a reason to talk to somebody early rather than a reason not to.

• What you already owe

  Measured against what you earn. Card minimums, car payments, student loans and anything else that shows on the report. A debt that is nearly paid off is not the same as one with five years to run, and that distinction can matter.

• What you have saved, and where it came from

  Both. A lender needs to see the money and to see that it is yours — which is why a large deposit that appeared last month gets asked about. Gift money is ordinary and allowed, and it needs documenting properly.

• The property itself

  The loan is secured on it, so it is part of the decision. Condition, value by appraisal, and for a condominium the financial health of the association. A file can be perfect and still turn on the building.

Questions people actually ask

• What credit score do I need?

  We will not put a number on this page, and you should be careful of anyone who does. The minimum differs by programme and by lender, lenders add their own requirements on top, and those move. More importantly, the score is read alongside everything else — somebody can be short on one measure and strong enough elsewhere. The real answer comes from somebody reading your actual file.

• Will checking hurt my credit?

  A mortgage credit pull is a hard enquiry and can move the score slightly. Shopping several mortgage lenders within a short window is generally treated as one enquiry by the scoring models, so comparing does not punish you the way people fear.

• I was turned down before. Is that it?

  No, and it is worth finding out what the actual reason was — it is often something specific and fixable rather than a general verdict. A decline from one lender on one programme in one year is not a judgement about you.

• How long does it take?

  A pre-approval can be days. A full approval depends on how quickly documents come in and on parts outside everybody’s control, like the appraisal. Anyone promising you a date before they have seen your file is guessing.

• Should I pay off my cards first?

  Sometimes yes, sometimes it makes no difference, and occasionally closing an old account does more harm than good. It depends on your file. This is worth asking before you move money around, not after.