The pre-approval letter for a mortgage is usually valid from 60 days to 90 days. You’ll need to reapply after 90 days.
A preapproval will let sellers know that you are a qualified buyer. Your lender will perform a hard-credit check and review your financial records to determine the amount of mortgage that they are willing to offer you. Preapproval letters are important and show sellers that you’re serious.
It is important to do this in markets where there are many buyers and bidding battles are common. Preapproval letters can help you get to the top!
A trustworthy real estate agent will be able to recommend lenders in your locality and give you advice on whether preapproval can help you make a winning bid.
What is a mortgage preapproval?
Mortgage preapprovals are documents from your lender stating that they will lend you a specific amount of money for the purchase of a house.
Preapproval means your lender has reviewed your finances and determined you would qualify for the mortgage amount. Sellers take this very seriously.
Remember: The chances of you being denied a loan after a preapproval mortgage are low, but they’re not zero. Preapproval does not guarantee a mortgage. The home you purchase must still meet certain criteria or your financial circumstances may change dramatically between the time the letter is issued and the actual home purchase.
| Prequalification and preapproval Prequalification is similar to preapproval — they both indicate that you will be approved for a loan — but getting preapproved is better. Prequalification does not require you to verify your financial data. Prequalification is only a rough estimate. Lenders use soft credit checks. Preapproval requires more underwriting – your lender confirms your finances and performs a hard pull of your credit. Preapproval is more important to sellers because it makes a stronger statement about your financial status. >> Continue reading: What is the difference between prequalified and preapproved for a home loan? |
How long is a preapproval valid?
Most mortgage preapproval letters have a 90-day validity period. However, lenders may issue preapprovals which expire in 30-60 days.
Your mortgage qualification can be affected if your financial situation drastically changes, whether for the better or worse. The expiration date of your preapproval may also change. If you win the lottery or lose your job, for example, the preapproval letter you received last month will no longer be relevant.
You can get a new preapproval if your old one expires. You may need a new preapproval even if the previous one is still valid. For example, your credit score might have improved significantly or you received a large raise at work.
How to get pre-approved for a mortgage
1. Select a Mortgage Type and Lender
Compare the fees and rates of different lenders. Compare the estimates of different lenders by prequalifying them.
After you choose a lender, it’s time to select a type of mortgage. There are many options available, from conventional fixed-rate loans to adjustable-rate loans to government-backed mortgages like FHA and VA mortgages.
Your financial situation and the house you are trying to purchase will determine which mortgage is best for you. Your agent can assist you in choosing the right lender for your situation.
2. Send all documents required for mortgage preapproval
You’ll need to provide a lot more documentation than usual to your lender because preapproval involves a thorough analysis of your financial situation. These are the documents you’ll need to submit for a mortgage preapproval.
- Photo ID such as a passport or driver’s licence
- Bank statements for several months prior (including checking, saving, and retirement accounts).
- W-2s for the last several years
- Paycheck stubs for the last several months
- Documentation for any other income such as rental or investment income, child support or commissions
- Documentation for any debts you have taken out recently or currently
- You can find court records relating to divorce, bankruptcy or foreclosure.
- You should receive a letter from anyone who is giving you money as a downpayment.
- Contact information for the current landlord (if applicable).
3. Include your preapproval letter in home offers
When you make an offer, be sure to show the seller your pre-approval letter!
In hot markets, sellers sort through all the offers and rate them according to how serious and solid each one is. Preapproved offers will usually be at the top.
It is best to work with your agent so that your preapproval letter can be included in any offer. A real estate agent with experience will help you to make your offer as competitive as you can in order to land your dream home.
Can You Get an Underwritten Preapproval?
Yes! A preapproval underwritten by a bank is the best you can get. It can speed up your purchase process.
The underwriting process is a way for a lender to assess your financial status and determine the risk of giving you a loan. This usually happens after both parties have signed the purchase contract.
A pre-underwriting approval or underwritten approval means that your lender has already completed the underwriting process prior to issuing your preapproval. This could potentially cut weeks off of the closing process. Motivated sellers may be very interested in this.
A preapproval underwritten can help you to compete in heated auctions or against cash-buyers, as your financing is guaranteed.
How long does it take to get preapproved?
Preapprovals can be granted in as little as one business day or as long as a full week.
Your lender will determine how quickly the process can be completed. If you have submitted all of the necessary paperwork and you are in a relatively straightforward financial situation, this could speed things up.
It can also take longer if the documents are not available or if your financial situation is unusual and requires an audit.
How long does it take to get approved regularly?
Approval for a home loan is a complex process that may take weeks.
Your lender will begin the underwriting procedure as soon as the seller accepts the offer. Underwriting conventionally takes between 20 and 45 days.
During this time, the lender will examine your finances, including your debts, assets, savings, credit history, income, and tax history. The lender will also order an appraised of your home to ensure that it is worth the amount you are applying for.
It is best to keep your finances as stable as possible. Don’t make major purchases, change jobs or default on debt.
Can getting preapproved hurt your credit?
Preapproval is an inquiry into your credit history, which may lower your score slightly.
It’s impossible to avoid this. To assess your finances, the lender will need to run a credit report. Soft inquiries, which don’t affect your credit score, are not enough to preapprove you.
A hard credit inquiry will not affect your credit score for two years.
| Expert tip:If multiple preapprovals are coming from different lenders, make sure they all happen within the same time frame of 45 days. This will count as one credit inquiry instead of many. |
How to Increase your Mortgage Preapproval?
Clean up Your Credit
Lenders will increase your preapproval if you improve your credit score. A better credit score can also lead to a lower rate of interest!
Extend your loan term
You can lower your mortgage payments by committing to a longer term loan, as you will spread out your mortgage over a greater number of months. It can be used to get your lender to increase your preapproval.
Reduce your debt
When determining your preapproval, lenders consider your debt-to income ratio (DTI). The less money you can spend on a mortgage, the more you will have to pay each month in debt. Paying down debt can increase your DTI and free up money, as well as increase your preapproval.
You can increase your down payment
You won’t need to pay private mortgage insurance if you put down 20% or more. This will lower your mortgage payment significantly. Your preapproval will increase if you are able to lower your mortgage payment.
Earn More Money
If you’re due a big raise at work, you might ask for it before you reapply — going to a higher income bracket will definitely help your preapproval. You might want to ask for a raise before you reapply. This will help you get preapproved.
Work With Your Real Estate Agent
Good real estate agents are familiar with the mortgage industry and know what lenders and mortgage types will work best for you. This can make it easier to navigate through the preapproval procedure. They can help you understand term loans, as well as many other details about preapproval.
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