How long is a mortgage pre approval letter good for

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If you’re at the point where you want to buy a home, your first step should be to secure a mortgage preapproval letter from a lender.

A preapproval letter tells the home seller that you are serious about buying the home and shows how much home you can afford. You’ll need to move fairly quickly, though, because the preapproval won’t last forever. Some banks’ preapprovals last for 30 days, while others go up to 60 days or more. Make sure to keep an eye on the expiration date, and if you don’t have a house contract by then, try to get an extension or work with another lender.

Here’s a deeper dive into mortgage preapproval letters, why they’re important and how to get one.

What Is a Mortgage Preapproval?

Mortgage preapproval is when you get a tentative commitment for a loan from a lender. Keep in mind, the loan amount on the preapproval letter might not match the final approved mortgage amount. It could be less than the amount on the letter, but you won’t get more in the final loan amount, unless you seek another preapproval at a higher amount. The letter also includes an interest rate, which you could lock in once you start the approval process.

A preapproval letter means that a lender has run a hard credit check on you, which temporarily dings your credit score, reviewed paperwork (such as recent pay stubs and tax returns) and believes you’re a creditworthy borrower.

It’s not a guarantee that you’ll get a loan, because the loan underwriters still need to examine your full income and credit history. But it will give a home seller as much assurance as possible that you can afford the home.

How Is Preapproval Different from Prequalification?

You might be tempted to just get a prequalification letter before you shop for homes because it’s quicker than a preapproval. But if it doesn’t go through the same rigorous process as preapproval, it’s not as reliable.

While some lenders might use the words preapproval and prequalification interchangeably, you’ll often find that prequalification is a quick process that might get an immediate response from a lender. In this type of prequalification, the lender will ask you to report your income, debts and other financial information.

But there is a major difference. While prequalifying requires a soft credit check, a preapproval likely requires a hard credit check and review of financial paperwork so that a lender can say with some assurance that you’re ready to secure a loan at a designated amount. Whereas, a prequalification primarily relies only on information you provide and your credit score, and won’t mean as much to a seller.

Prequalifying might come in handy if you’re very early in the home search process and want to do a quick check with a lender. It would give you an estimate of the loan amount you can afford, and a chance to address income and debt-related problems before getting a preapproval. Preapproval, on the other hand, is best when you’re set on purchasing a particular home.

How Can You Get Preapproved for a Mortgage?

The most important task for a prospective homeowner seeking a preapproval letter is to gather all the paperwork needed.

This collection of financial documents will give the lender as full of a picture as possible about your income, debts and credit history. This information helps underwriters estimate how much of a loan you can afford and the level of risk that you present to them.

The preapproval process will cover:

• Income. You’ll be expected to provide recent pay stubs, often the last two pay periods, that indicate how much you make and prove employment. Stable income is an important requirement for any mortgage loan.
• Assets. Your bank statements and investment accounts will provide a larger picture of how much money you might have available, which is especially important if your income is low or inconsistent.
• Credit. A lender will run a hard credit check to look at your current score and the last several years of your credit history. Keep in mind that mortgage lenders look at a score from all three credit bureaus, which could be different than the score you see on free score checking websites or through your credit card company.
• Debts. You will need to list the debts you have which helps the lender understand your debt-to-income (DTI) ratio. That ratio is vital to determining how much of a mortgage loan you can afford.

How Long Can a Mortgage Preapproval Take?

Mortgage preapproval could take up to 10 days, in part because of the process of submitting and reviewing financial paperwork.

You could try to speed up the process by collecting all the paperwork you’ll need in advance and providing it to the lender right away.

If you’re set on buying a particular house and don’t have a preapproval letter, you’re likely going to miss out because sellers usually prefer buyers who are already preapproved for financing. If you don’t have one, the concern is that you won’t get approved for a mortgage loan and then the deal falls through.

How Preapproval Impacts my Credit Score

A mortgage preapproval requires a hard credit check that results in a hard inquiry on your credit report, which can drop your score by up to five points for one year. However, it will stay on your report for two years.

The lender will ask the three major credit bureaus—Experian, Equifax or TransUnion—to provide a review of your credit. To prepare for the inquiry, request your free credit report from all three bureaus months ahead of your expected preapproval application so you can correct any errors that might show up and take steps to improve the record. As a result, your score could increase, which means you will get a better interest rate and terms on your mortgage.

Should You Get More Than One Preapproval?

When trying to get the best deal on a mortgage loan, you might get lucky with the first lender on a preapproval. But you’ll likely want to shop around and check with multiple mortgage lenders. Keep in mind, however, that if you seek a preapproval letter with each lender, it will likely ding your credit score with every check. It might be more beneficial to do a prequalification first; or ask the lender to give a general idea of what they can offer based on your knowledge of your current credit score and financial information.

There are several factors that could affect your decision on which loan deal is best, including the interest rate, fees and whether the loan has a low down payment and/or down payment assistance. You might also find other factors to be important such as how long the preapproval letter lasts, the length that the lender allows you to lock in an interest rate, and the proximity or customer service of the lender.

In a competitive housing market, you want to be at the forefront if there’s a bidding war for your dream home. Make sure to take the time to do it right by preparing your paperwork, accurately detailing your debts and securing the preapproval so you can be well-prepared to win your bid.

Does a mortgage pre approval expire?

How long do pre approval letters last?