Pre-Approval vs Pre-Qualification: What You Actually Need

Understand the critical difference between pre-qualification and pre-approval. Complete document checklist for W-2 employees, tech workers with RSUs, self-employed, and H-1B visa holders.

Tags:pre-approval, pre-qualification, mortgage, documents, financing, seattle, tech-workers
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You call a lender and 10 minutes later they email you a "pre-qualification letter" for $900,000. You're ready to make offers, right?

Not quite. In Seattle's competitive market, sellers and their agents know the difference between pre-qualification (basically worthless) and pre-approval (what you actually need). Showing up with a pre-qual letter is like showing up to a job interview without a resume.

Table of Contents

Pre-Qualification vs Pre-Approval

Pre-Qualification: The Quick Estimate

What it is: Rough estimate based on information you tell the lender (not verified)

Process:

  • 10–15 minute phone call or online form
  • You provide income, debts, assets (verbal)
  • Lender runs soft credit check (sometimes)
  • Lender gives estimate of what you might qualify for

Documents required: None

Time to get: 10 minutes to same day

Value: Almost none in Seattle's market

Example conversation:

  • Lender: "What's your income?"
  • You: "$180,000"
  • Lender: "Any debts?"
  • You: "$1,500/month"
  • Lender: "You're pre-qualified for $900,000"

Problem: Lender hasn't verified anything. You could be lying. Sellers know this.

Pre-Approval: The Real Deal

What it is: Conditional commitment to lend based on verified documentation

Process:

  • Complete mortgage application
  • Submit all financial documents
  • Lender verifies income, assets, debts
  • Lender runs hard credit check
  • Underwriter reviews and approves
  • Lender issues pre-approval letter

Documents required: Everything (see below)

Time to get: 1–3 days with all documents ready

Value: Essential for making competitive offers

What lender verifies:

  • Income (pay stubs, W-2s, tax returns)
  • Assets (bank statements, investment accounts)
  • Employment (calls employer)
  • Credit (pulls all three bureaus)
  • Debts (credit report)

Result: Lender commits to lending you specific amount, subject only to finding acceptable property and appraisal.

Side-by-Side Comparison

FeaturePre-QualificationPre-Approval
Documents requiredNoneEverything
Income verifiedNoYes
Assets verifiedNoYes
Credit checkSoft or noneHard pull
Underwriter reviewNoYes
Time to get10 minutes1–3 days
Valid forN/A60–90 days
Seller acceptanceWeakStrong
Binding on lenderNoConditional yes

What Sellers See

Pre-qualification letter:

  • "This buyer might qualify"
  • "We haven't verified anything"
  • "This could fall through"
  • Seller reaction: Weak offer, might not accept

Pre-approval letter:

  • "This buyer is approved"
  • "We've verified their finances"
  • "This will likely close"
  • Seller reaction: Strong offer, taken seriously

Seattle reality: In competitive markets (spring, hot neighborhoods), sellers won't even consider pre-qual letters. You need pre-approval.

Documents You Need

W-2 Employees (Standard)

Income verification:

  • Pay stubs (2 most recent)
  • W-2 forms (2 years)
  • Tax returns (2 years) - if claiming deductions or have rental income

Asset verification:

  • Bank statements (2 months, all pages)
  • Investment account statements (2 months)
  • Retirement account statements (if using for down payment)
  • Gift letter (if receiving gift funds)

Identity and employment:

  • Driver's license or passport
  • Social Security card
  • Employment verification (lender calls employer)

Credit and debts:

  • Lender pulls credit report
  • Explanation letters for any credit issues

Other:

  • Divorce decree (if applicable)
  • Bankruptcy discharge (if applicable)
  • Rental history (sometimes)

Tech Workers with RSUs

Everything above, plus:

RSU documentation:

  • RSU vesting schedule from employer
  • Brokerage statements showing RSU sales (2 years)
  • Tax returns showing RSU income (2 years)
  • Offer letter or compensation statement

Why needed: Lenders use 2-year average of RSU income. Need to verify vesting schedule and actual income received.

Example:

  • Base salary: $180,000
  • RSU Year 1: $80,000
  • RSU Year 2: $60,000
  • Lender uses: $70,000/year average
  • Total qualifying income: $250,000

Stock options:

  • Generally don't count toward income
  • Can use proceeds for down payment after exercising
  • Need documentation of exercise and sale

Self-Employed

Everything above, plus:

Business documentation:

  • Tax returns (2 years, personal and business)
  • Profit & loss statement (year-to-date)
  • Business bank statements (2 months)
  • CPA letter (sometimes)
  • Business license

Why harder: Lenders average 2 years of income. If income is declining or inconsistent, may not qualify for as much.

Deductions problem: Business deductions reduce taxable income, which reduces qualifying income.

Example:

  • Gross business income: $200,000
  • Business deductions: $50,000
  • Taxable income: $150,000
  • Lender uses: $150,000 (not $200,000)

H-1B Visa Holders

Everything above, plus:

Visa documentation:

  • H-1B approval notice (I-797)
  • Passport with visa stamp
  • Employment authorization document
  • Employer letter confirming visa renewal plans

Why needed: Lenders need to verify work authorization and job stability.

Challenges:

  • Some lenders don't work with visa holders
  • May need larger down payment (15–20%)
  • May need letter from employer about visa renewal

Seattle reality: Many lenders in Seattle area work with H-1B holders (large tech worker population). Shop for lenders experienced with visa holders.

How to Organize Your Documents

Create a Digital Folder

Folder structure:

Pre-Approval Documents/
├── Income/
│   ├── Pay_Stubs/
│   ├── W2s/
│   └── Tax_Returns/
├── Assets/
│   ├── Bank_Statements/
│   ├── Investment_Statements/
│   └── Retirement_Statements/
├── Identity/
│   ├── Drivers_License/
│   └── Social_Security_Card/
└── Other/
    ├── Gift_Letter/
    └── Explanation_Letters/

Document Checklist

Income (W-2 employees):

  • 2 most recent pay stubs
  • W-2 forms (2 years)
  • Tax returns (2 years) - if applicable

Income (RSUs):

  • RSU vesting schedule
  • Brokerage statements (2 years)
  • Tax returns showing RSU income (2 years)

Assets:

  • Bank statements (2 months, all accounts)
  • Investment statements (2 months)
  • Retirement statements (if using)
  • Gift letter (if applicable)

Identity:

  • Driver's license (front and back)
  • Social Security card

Other:

  • Explanation for credit issues (if any)
  • Divorce decree (if applicable)
  • Visa documents (if H-1B)

Tips for Gathering Documents

Pay stubs:

  • Need 2 most recent (within 30 days)
  • Must show year-to-date earnings
  • All pages required

Bank statements:

  • Need 2 most recent months
  • All pages (even blank pages)
  • All accounts (checking, savings, investment)
  • Explain large deposits (over $1,000)

Tax returns:

  • All pages and schedules
  • Signed and dated
  • Both personal and business (if self-employed)

Pro Tip: Scan everything to PDF. Name files clearly: "2024_W2_Amazon.pdf" or "Bank_Statement_Chase_Oct2024.pdf"

The Pre-Approval Process

Step 1: Choose Lender (1–2 days)

  • Shop 3–5 lenders
  • Compare rates and fees
  • Choose best option
  • See our Choosing a Lender article

Step 2: Complete Application (30–60 minutes)

Information needed:

  • Personal info (name, address, SSN)
  • Employment info (employer, income, job title)
  • Asset info (bank accounts, investments)
  • Debt info (credit cards, loans, car payments)
  • Property info (estimated price, down payment)

Where to apply:

  • Online (most lenders)
  • Phone (some lenders)
  • In person (some lenders)

Pro Tip: Have all info ready before starting. Application takes 30–60 minutes if you have everything.

Step 3: Submit Documents (same day)

  • Upload to lender's portal
  • Email to loan officer
  • Drop off in person

Response time:

  • Lender confirms receipt: Same day
  • Lender reviews: 1–2 days
  • Requests additional docs: 1–2 days

Step 4: Credit Check (same day)

  • Lender pulls credit from all three bureaus
  • Uses middle score
  • Hard inquiry (affects score by 5–10 points)
  • Multiple mortgage inquiries in 45 days = 1 inquiry

Step 5: Verification (1–2 days)

What lender verifies:

  • Employment (calls employer)
  • Income (reviews pay stubs, W-2s)
  • Assets (reviews bank statements)
  • Debts (reviews credit report)

Common requests:

  • Explanation for large deposits
  • Explanation for credit issues
  • Additional bank statements
  • Updated pay stub

Step 6: Underwriter Review (1–2 days)

  • Underwriter reviews entire file
  • Verifies all documentation
  • Calculates DTI
  • Determines approval amount
  • Issues conditional approval

Conditions might include:

  • Updated pay stub at closing
  • Verification of down payment
  • Explanation for any changes
  • Appraisal of property

Step 7: Pre-Approval Letter (same day)

  • Lender issues letter stating approved amount
  • Valid for 60–90 days
  • Conditional on finding acceptable property
  • Can be customized for specific offers

Total time: 1–3 days if you have all documents ready

What the Pre-Approval Letter Says

Key Information

Borrower information:

  • Your name
  • Property address (or "to be determined")

Loan information:

  • Approved loan amount
  • Loan type (conventional, FHA, VA, jumbo)
  • Down payment amount
  • Interest rate (sometimes)

Conditions:

  • Subject to acceptable property
  • Subject to satisfactory appraisal
  • Subject to no change in financial situation
  • Valid through [date]

Lender information:

  • Lender name and contact
  • Loan officer name and contact
  • Date issued

Example Letter

[Lender Letterhead]

October 20, 2025

To Whom It May Concern:

This letter is to confirm that [Your Name] has been pre-approved 
for a mortgage loan up to $750,000.

Loan Details:
- Loan Amount: Up to $750,000
- Loan Type: Conventional
- Down Payment: 10% ($82,500 minimum)
- Property Type: Single-family, townhome, or condo

This pre-approval is subject to:
- Acceptable property and satisfactory appraisal
- No change in borrower's financial situation
- Final underwriting approval

This pre-approval is valid through January 20, 2026.

Please contact me with any questions.

[Loan Officer Name]
[Contact Information]

Customizing for Offers

When making offer, ask lender to:

  • Include specific property address
  • Show exact loan amount for that property
  • Include any special terms
  • Print on lender letterhead

Example:

  • Generic letter: "Pre-approved up to $750,000"
  • Customized letter: "Pre-approved for $825,000 purchase at 123 Main St, Seattle"

Why it matters: Shows seller you're serious about their specific property.

How Long Pre-Approval Lasts

Typical Validity: 60–90 Days

Why it expires:

  • Financial situation can change
  • Credit report gets old (need fresh pull)
  • Income needs reverification
  • Assets need reverification

What happens when it expires:

  • Need to update documents
  • Lender pulls credit again
  • Reverifies employment
  • Issues new letter

Time to renew: 1–2 days (faster than initial)

Maintaining Your Pre-Approval

Don't do these things:

  • Change jobs
  • Open new credit cards
  • Make large purchases (car, furniture)
  • Take on new debt
  • Make large deposits without explanation
  • Miss any payments

Do these things:

  • Keep saving
  • Pay bills on time
  • Keep same job
  • Maintain same accounts
  • Update lender on any changes

If something changes:

  • Tell lender immediately
  • May need to reverify
  • May affect approval amount
  • Better to know now than at closing

Common Issues and Solutions

Issue 1: Large Deposits

Problem: Bank statement shows $15,000 deposit. Lender asks for explanation.

Solution:

  • Provide documentation (gift letter, bonus letter, tax refund)
  • Write explanation letter
  • Show source of funds

Why it matters: Lenders need to verify all funds are legitimate (not borrowed).

Issue 2: Recent Job Change

Problem: Started new job 2 months ago. Lender wants 2-year history.

Solution:

  • Provide offer letter
  • Show same industry/role
  • Explain career progression
  • May need larger down payment

Why it matters: Job stability affects approval.

Issue 3: Self-Employment Income Declining

Problem: Year 1 income $150,000, Year 2 income $120,000. Lender uses $135,000 average.

Solution:

  • Provide explanation for decline
  • Show year-to-date income is higher
  • Consider waiting until year-end
  • Buy less expensive home

Why it matters: Declining income is red flag for lenders.

Issue 4: Credit Issues

Problem: Late payment 6 months ago. Credit score dropped to 650.

Solution:

  • Write explanation letter
  • Show it was one-time issue
  • Show current payments on time
  • May need larger down payment or higher rate

Why it matters: Recent credit issues affect approval and rate.

Issue 5: RSU Income Volatility

Problem: RSU income was $100,000 in Year 1, $60,000 in Year 2 (stock price dropped).

Solution:

  • Lender uses $80,000 average
  • Qualify based on lower income
  • Use RSUs for larger down payment instead
  • Wait for stock recovery

Why it matters: Lenders use 2-year average, not current value.

Pre-Approval Strength

Factors That Make Pre-Approval Stronger

Strong pre-approval:

  • 20%+ down payment
  • Credit score 740+
  • DTI under 36%
  • Stable employment (2+ years)
  • Large cash reserves (6+ months)
  • No contingencies

Weak pre-approval:

  • 3–5% down payment
  • Credit score 620–680
  • DTI 43–50%
  • Recent job change
  • Minimal reserves
  • Multiple contingencies

Seattle competitive market: Strong pre-approval can be difference between accepted and rejected offer.

How to Strengthen Your Pre-Approval

Increase down payment:

  • 10% → 15% → 20%
  • Shows more commitment
  • Reduces lender risk

Improve credit score:

  • Pay down credit cards
  • Fix errors
  • Wait 3–6 months if needed

Lower DTI:

  • Pay off car loan
  • Pay off credit cards
  • Increase income

Build reserves:

  • Save 6–12 months expenses
  • Shows financial stability
  • Reduces lender risk

Get fully underwritten:

  • Some lenders offer "underwritten pre-approval"
  • Underwriter reviews file before you find home
  • Strongest possible pre-approval
  • Takes 3–5 days but worth it in competitive market

Summary

Pre-qualification is worthless – sellers won't take you seriously. Pre-approval is essential with verified finances and conditional commitment. The process takes 1–3 days with all documents ready and remains valid for 60–90 days.

Documents needed include pay stubs, W-2s, bank statements, and tax returns (if applicable). Tech workers need RSU vesting schedules and 2-year income history. Don't change your finances during the pre-approval period – no new jobs, credit, or large purchases.

Customize your letter for each offer with the specific property address to show sellers you're serious.

Next Steps

  1. Gather all documents using checklist in this article
  2. Choose lender (see our Choosing a Lender article)
  3. Complete application - takes 30–60 minutes
  4. Submit documents - upload or email same day
  5. Wait for approval - 1–3 days
  6. Receive pre-approval letter - valid 60–90 days
  7. Start house hunting with confidence

Additional Resources

Document checklist: Download and print checklist from this article

CFPB guide: consumerfinance.gov/owning-a-home (mortgage process)

Credit reports: annualcreditreport.com (free credit reports)

Disclaimer: This article provides general information about mortgage pre-approval for educational purposes. Requirements vary by lender, loan type, and individual circumstances. Always consult with licensed mortgage professionals for specific advice about your situation. Document requirements and timelines are approximate and based on typical 2024 practices – actual requirements may vary.

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