Get preapproved for your home loan with confidence. This guide covers the mortgage preapproval process, debt-to-income (DTI), closing costs and how Travis Credit Union can help.
If you’re seriously considering becoming a homeowner this year, there are two things you should do: Create a plan and get pre-approved for a home loan. Why? Being prepared and ready to buy ensures you can act quickly with an offer when you find the perfect home. This is especially important because interest rates are expected to drop slightly in 2026, which will likely create more homebuying activity.
Having a clear plan and being preapproved can ease the stress associated with buying a home. Some ways to prepare are to organize your finances, save for closing costs and a downpayment, and get pre-approved by a home lender.
Find Your Target Price Range
Purchasing a home is a major milestone that can be more challenging if you’re not prepared. One of the most important things you can do is to know how much home you can afford. Your target price range lets you focus on properties that are within reach as well as gives you an idea of how much you’ll need to save for a down payment, closing costs, moving costs and renovations, if needed. The median existing home prices in the U.S. was at $422,400 in July 2025, according to Bankrate.com. This could continue to rise due to current market conditions.
Get Your Finances in Order
To prepare for the homebuying process, you’ll need to take a detailed review of your finances, which means all your income, debt, credit history and credit score. Increasing your credit score and paying down debt are very important because lenders use both to determine if you qualify for a home loan and what your interest rate will be.
Improving your credit score can be done by paying down debt. When you lower your debt, you lower your Debt-to-Income Ratio (DTI). Lenders use your DTI to determine how likely you are to pay back your loan on time and in full. Also, saving money for the upfront costs of purchasing a home and building an emergency fund are smart ways to set you up for success.
Here are some things to do to get your finances in order:
- Review Your Credit History: Review your credit history by getting a free annual credit report at annualcreditreport.com. Ensure that all your accounts are current and belong to you. File any disputes with accounts that are not yours. Pay down debt to lower your DTI and reduce your credit utilization below 30%. These actions can increase your credit score and solidify your chances of getting the best interest rate possible.
- Save for Homebuying Costs: There are substantial upfront costs associated with buying a home. Ensure you have enough funds on hand to cover inspection, appraisal, lender and title fees. Additionally, the minimum down payment required is 3% of the home purchase price. Depending on the type of loan you get, you may need to have up to 20% saved for a down payment.
- Establish an Emergency Fund: Setting yourself up for success as a homeowner is easier when you have an emergency fund. You’ll be responsible for any wear and tear that may show up in your home and having an emergency fund can help alleviate the stress of unplanned repairs. Aim to save 3 to 6 months of your total living expenses to cover both mortgage payments and unexpected home repairs.
Being prepared for the expenses that come with buying a home requires having your finances in order. Having a high credit score and enough funds saved to cover home purchase costs and emergencies are great ways to ensure your home buying process runs smoothly.
Costs Associated with Homebuying
As discussed, there are costs associated with the homebuying process. You’ll need to save for these two things:
- Down Payment: Depending on the type of mortgage, you may be required to provide a down payment of anywhere from 3% up to 20% of the listed price. For example, if you are buying a $400,000 home, a 20% down payment would be $80,000. Providing a 20% downpayment lets you avoid having private mortgage insurance added to your loan, keeping your monthly payment as low as possible. Do your research and find lenders that provide the right mortgage which best fits your financial needs, such as Travis Credit Union.
- Closing Costs: Aside from the down payment, there are closing costs to be paid before you can get the keys to your home. These include application, credit pull, origination, underwriting, title, appraisal, home inspection and transfer tax fees. Closing costs typically range from 2% to 5% of the loan's principal amount. There are options that let you roll your closing costs into the loan principal, but this may result in higher interest rates and a higher monthly payment.
Upfront costs can add up, especially if you must provide a higher down payment and cover all the closing costs. Having saved enough before you make an offer on a home puts you in a better position to manage these expenses.
The Mortgage Preapproval Process: What to Expect
Once your finances are in order, research lenders and select one with the right mortgage that fits your unique financial situation. A mortgage loan preapproval will give you an idea of how much of a loan you qualify for and what your monthly mortgage payment will be. A preapproval will give you a price range for your home search, which will make house hunting smoother.
Your lender will require the following documents for your preapproval:
- Pay Stubs: You’ll need to verify your income with one or two months of paystubs from your employer.
- Tax Returns: Your lender will require tax returns for the past two years to verify your income, especially if you’re self-employed.
- Bank Statements: Bank statements from the past two or three months will help the lender see your cash flow and how you manage your accounts.
- Credit Report: The lender will pull your credit report to review your history, score, and outstanding debts. Combined with your income, this information will help determine if you can be preapproved for a home loan. If not, you’ll be told what areas to work on so that you may qualify. For example, you may need to pay off a certain debt, such as an auto loan, before you qualify.
Once you are preapproved, this offer will be valid for 60 to 90 days, depending on lending policies. Having a preapproval on hand will show sellers you are a serious buyer, which improves your chances of having your offer accepted. Additionally, preapprovals can make the escrow process much quicker because the lender will already have all your documents.
How Travis Credit Union Can Help
Travis Credit Union offers various home loans to fit your unique financial situation, including fixed-rate and adjustable-rate mortgages, FHA loans and VA loans. Our expert mortgage loan consultants will walk you through the homebuying process, so you’ll know what to expect every step of the way.
Whether you are a new homebuyer or an experienced one looking to refinance your home or for a home equity product, Travis Credit Union is here to help. Visit Traviscu.org to learn how TCU can help you on your homebuying journey.