If you want to show sellers you're seriously interested in buying their home, getting mortgage pre-approval is a critical first step. It proves that, after digging through your financials, a lender is willing to give you money to buy a house.
"Getting pre-approved is a great way to differentiate yourself when making an offer," says Linda Walters, a Realtor® in Wayne, PA.
Unfortunately, a pre-approval isn't a one-and-done process. In fact, if your home search drags on for several months, there's a chance your pre-approval won't be valid after a certain point. Let's explore how long a pre-approval letter remains valid and what to do if yours expires before you find a house.
Any good mortgage professional will tell you that your house hunt shouldn’t start with a call to your realtor; it should start with a call to a mortgage professional who will work with you in order to obtain a mortgage pre-approval. After all, how can you shop for property when you don’t know how much money you have to spend or, more importantly, how much a lender will loan you for your mortgage?
When you’re seriously shopping for a house, getting a pre-approval letter is one of the best decisions you can make. Although a rather quick and painless process, chances are you have a few questions when it comes to the pre-approval process, such as, “How long does a mortgage pre-approval last?”
And that’s what a mortgage pre-approval is: the process of determining whether a borrower meets a particular lender’s guidelines for a home loan. It shouldn’t be confused with a mortgage pre-qualification, which is a much more cursory look at your financial picture. A mortgage pre-approval gives you some confidence that you are a qualified borrower in the eyes of a lender. This is beneficial because the last thing you want when going through the home buying process is to have done your own calculations and have figured out what you think you can afford using a mortgage calculator and the available interest rates, then apply for a mortgage with a lender and receive an entirely different interest rate based on your overall strength as a borrower. To avoid any nasty surprises, it’s best to get pre-approved before doing anything else.
How long does a mortgage pre-approval last?
Once pre-approved, your pre-approval letter typically lasts 60-90 days before you have to get a new one. While this may seem like a long time upfront, it doesn’t allow for a leisurely stroll through weeks of open houses to find something that may work. Finding the house that you want to spend time in (and a lot of money) takes a bit of time, so you’re going to want to move as quickly as possible.
Mortgage pre-approval is fast and easy
Having a pre-approval letter in hand is a powerful thing when you go house hunting. Almost like a briefcase full of cash (and probably safer to carry around). So next time you’re watching the tube (and forgot to DVR it so you’re stuck with the commercials), don’t waste that time. Grab the stuff you need during the stupid beer ads and then make a call.
What Is a Mortgage Pre-Approval?
- A more official process to see if you qualify for a mortgage
- That requires a credit check from the lender
- The review of financial documents
- And possibly an automated underwrite
A pre-approval, on the other hand, actually has legs. It’s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question.
It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file based on current mortgage rates.
When mortgage lenders verify these things, they can actually calculate minimum credit card payments, student loans, and other debt obligations against your income to figure out your DTI and subsequently what you can afford.
Aside from being way more accurate, furnishing a pre-approval letter shows the interested parties (sellers, agents) that you’re a committed home buyer, boosting your chances of sealing the deal at the price you want.
Getting preapproved will also show you how much house you can afford, not just a flimsy estimate. This is important for you as well to ensure you don’t get in over your head.
Mortgage Pre-Approval Requirements:
- Credit report
- Bank statements
- Pay stubs
- Tax returns
How Long Is a Mortgage Pre-Approval Good For?
- Generally good for 60-90 days
- But there’s no guarantee depending on what transpires
- It’s just a conditional approval based on the information in the file
- So if anything material changes, you approval may also change
Once you provide all the required documentation and get the mortgage pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that a lot of things can change during that time, such as your credit score, so it’s not 100% guaranteed.
Again, a pre-approval is not a guarantee that you will be approved for a mortgage. Otherwise it would just be an outright approval. And even an approval is still conditional on you meeting a series of requirements set forth by the lender.
If things do change dramatically, or even a little bit, it won’t matter if the pre-approval is just a few days old, as material changes can affect the outcome of your approval.
For example, if your credit score falls below a key threshold, like from 620 to 618, you could be denied after getting your pre-approval letter. It’s not the bank’s fault either, it’s just an unfortunate turn of events.
Same goes for anything the underwriter sniffs out during the approval process. They get a lot more involved and may find things that were initially missed, such as a late payment or a credit card or personal loan you didn’t disclose.
When it comes down to it, an approval is never a sure thing until the mortgage is funded and closed!
As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.
Why mortgage pre-approval matters
"If you want to purchase a home, you will have to demonstrate that you are financially able to buy it," says Cathy Baumbusch, a Realtor in Alexandria, VA. "It doesn't make sense to look for properties to purchase without first knowing what price range you qualify for and are able to purchase," she says.
If you are in a competitive market, a pre-approval letter is often needed for your offer to be taken seriously.
How long does your mortgage pre-approval last?
It varies from lender to lender, but mortgage pre-approval is typically valid for about 90 days, according to Baumbusch. Your letter will have a date on it, after which it is no longer valid.
The reason pre-approval letters "expire" is because banks need the most up-to-date information about your salary, assets, and debts. Three months is long enough that you could have left a job, taken on new debts, or spent what was previously in your bank account.
In fact, even if you're pre-approved, most lenders will want an updated set of pay stubs and bank statements around the time of closing. Hey, nobody ever said getting a mortgage was easy!
What do you do if your mortgage pre-approval has expired?
If you're still house hunting past the expiration date on your pre-approval letter, you just need to get another one. If you go to the same lender, it "can be updated by reverification of your financial documents," says Sheree Landerman, a Realtor in Farmington, CT.
You will need to provide updated pay stubs and bank statements, but if nothing major has changed in your financial world, it should be no problem to get a fresh pre-approval letter from your lender.
What are the types of pre-approvals?
There are two types of pre-approvals. For both, you will need to submit a full application and supporting documents. The difference comes from how the lender processes your application.
1. Full assessment
A full assessment occurs when the lender’s credit department reviews your documents and conducts a credit check. They will ask any questions that they need to clarify from the credit report and other documents and then proceed to issue a pre-approval subject to a satisfactory valuation of the property. This type of pre-approval will take a few days to be issued and is the most thorough, so it is highly reliable.
2. System generated
Unlike a full assessment pre-approval, a system generated pre-approval can be received quite quickly, sometimes on the spot or within a few hours. However, since it is system generated, the finer details of the credit report and documents have not been gone through by a credit assessor. This type of pre-approval will typically come with more conditions and rely heavily on the details that you included in your application.
When you are applying for a pre-approval, make sure to ask the lender which method they use. This way, you will know how much work has been done and how much you should rely on it.
Why should you get a pre-approval?
A pre-approval is by no means compulsory. If you have already found your dream house and the right loan product for your needs, you can go ahead and apply directly to your lender without asking for a pre-approval.
In most cases, though, you should still look for pre-approval as it is beneficial in several ways.
First, having a pre-approval means you can go from open houses and inspections knowing exactly how much you can afford to spend. You know you will be able to get a mortgage on a house within a certain price range, which means you will not waste time looking at houses you can’t afford.
A pre-approval also enables you to make a serious offer on the spot, as both you and the seller can be sure that there will be a real deal. It can provide you with an increased negotiating power when the time comes for agreeing upon a price with the seller, and you will be considered a preferred buyer, and having a lender’s seal of approval in place can help you win a bidding war against others who may not qualify.
Pre-approval can also alleviate the headache of having to search out and consider a whole bunch of different loans every time you find a property you want to make an offer on. In other words, it allows you to make an offer on several houses.
Lastly, pre-approval can help the whole home buying process proceed more smoothly. It can also reduce stress as it helps you speed up the documentation process once you have found a house to buy.
The mortgage approval process indeed takes some time and effort, but it is definitely worth going through for the freedom and peace of mind it provides. The good news is that a pre-approval is free and there is no obligation.
What Is a Mortgage Pre-Qualification?
- A quick check to see if you qualify for a mortgage
- That doesn’t require a credit pull
- Or any verified information such as tax documents or bank statements
- Simply a first-step to get the ball rolling
If you choose to finance the home purchase with a mortgage, as opposed to cash, you’ll likely need to get pre-qualified first. A “pre-qualification” isn’t as robust as a pre-approval, but it’s a good first step to ensure you can purchase the home you desire (or any one at all).
A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.
How can you get a pre-approval?
Here are the steps you can take to increase your chances of getting pre-approved for a home loan:
1. Review your current finances
First of all, consider your income, typical expenses, assets and debts. From there, you can get a rough idea of how much you can afford to borrow. You should also consider how much you might be able to afford in monthly repayments as this will also affect how much you can borrow.
2. Consider what sort of mortgage you are applying for
Have a look at the different types of home loans available – fixed vs. variable, principal & interest vs. interest only – and decide which one is right for your situation.
3. Fill in the pre-approval application with a lender
The lender will initially require some basic personal information – such as your name, address and age – for identity verification purposes. They will also assess the following:
- Your credit report, or credit history, which is a record of your loans, credit cards and other credit products over the past several years, including any defaults or bankruptcies (Your credit report determines your credit rating, which is a numerical score that rates your ability to pay back credit on time).
- Your current financial situation, including how much you own and how much you owe.
- Whether the loan you are looking to apply for is reasonable or not given your financial situation. For the lender to be able to assess these things, you will need to provide the following:
- Evidence of your income – such as pay slips and/or tax returns.
- Evidence of your savings – such as bank statements.
- Evidence of your current debts – such as credit cards, home loans and personal loans. If you pass the lender’s assessment, then you can expect to be granted a pre-approval.
4. Secure a formal pre-approval
Securing a formal pre-approval is the only assurance that you can negotiate confidently with sellers. Without a signed letter, some sellers and real estate agents will not accept your offer, as they can’t guarantee that you will get the necessary finance.
It follows that you should avoid non-formal, non-written pre-approvals – including fast "30 minutes or less" online applications or applications over the phone – as they have fewer guarantees and usually comes with many conditions that you must fulfil at a later date. Also, avoid lenders that would not assess your application in the pre-approval process.
Also, while it is beneficial to have a formal pre-approval before making an offer on a property, you need to be wary about how many pre-approvals you apply for.
Every time you submit a pre-approval application, the lender will run a credit check, which will then leave an enquiry on your file. Multiple enquiries can negatively affect your credit score, so it is advisable to apply only with the lender you intend to go with.
How long is the validity of a pre-approval?
For most lenders, pre-approvals last for three to six months. This is because lenders have an expiry date as a borrower’s financial situation and the property market can often change over a few months. When applying for a pre-approval, ask your lender about the expiry date and what will happen if you do not find a property within that timeframe.
Aside from the fact that a pre-approval expires, there are other factors that may affect its validity:
1. Unacceptable property
An assessment of whether the property is acceptable by the lender is not included in a pre-approval since it has not been found yet. This is why one of the conditions that come with a pre-approval is that it is "subject to a satisfactory valuation". Certain types of properties may not be acceptable to some lenders – such as small apartments or particular apartment blocks, hobby farms, properties in certain suburbs, a property with large power lines close to it, or a property which is in poor repair.
2. Change in circumstances
If your situation – be it personal or financial – changes after you have been pre-approved, the lender will need to reassess your application. (In the worst case scenario, you may no longer be able to afford the repayments.) Some examples of these changes include changing jobs, going part-time or becoming a contractor, taking on a new credit card or loan, having children, emergency expenses, or the lender finding out about credit cards or loans you did not disclose.
3. Interest rate changes
It is always possible that interest rates will change, most especially if the RBA changes the cash rate at its monthly meeting. If interest rates rise, it could mean that you can no longer borrow the maximum amount specified in your pre-approval.
Despite the fact that a pre-approval is not a final guarantee that your home loan application will be approved, the fact that it expires and can be subject to change, it is highly advisable that you complete a pre-approval prior to making an offer on a property. A pre-approval is still the best indicator that the lender will accept your scenario, giving you confidence as you go house hunting.
Do You Need a Mortgage Pre-Approval Letter to Make an Offer?
- In a hot real estate market
- It’s generally a necessity to have a mortgage pre-approval in hand
- While highly recommended, it’s not an outright requirement
- And may not be necessary in colder real estate markets
At the end of the day, you don’t necessarily NEED a pre-approval letter to make an offer on a piece of property. But nowadays, with so few properties on the market, and so many multiple-bid situations, it’s often a requirement just to hear back from the seller’s agent.
Sure, you can tell your real estate agent to tell the listing agent that you’ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,000 a year. And they might say fine, skip the pre-approval.
But chances are that’s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer. And you might learn or catch something along the way.
Next Step After Mortgage Pre-Approval
- Either apply for a home loan with the lender in question
- Or apply for a mortgage elsewhere
- You aren’t obligated to use the same lender you got the pre-approval from
- So make sure you take the time to comparison shop
The next step after receiving a mortgage pre-approval is to either apply with the lender who provided it or apply for the loan elsewhere. You can certainly shop around and decide which company is the best fit.
In fact, you can even use the pre-approval quote as leverage to get a better mortgage rate (and/or lower closing costs) with a different lender. Remember, you can use any company you wish, regardless of what your real estate agent tells you!
Once you’ve selected a lender, you’ll need to sign disclosures and express your intent to proceed with the loan application. The lender will then begin collecting paperwork and signatures, including the purchase contract, in order to process the loan.
It will eventually land on an underwriter’s desk for full approval, at which point a list of conditions will be generated (if applicable) in order to draw docs and fund the loan.
To summarize, the difference between a mortgage pre-qualification letter and a mortgage pre-approval letter:
- First step
- Less robust
- Based on estimates
- Doesn’t require a credit pull
- Carries less weight/ not a sure thing
- Not taken seriously
- Based on verified information
- Must complete an actual loan application
- Requires a credit pull
- Must be underwritten (manual or automated)
- Written conditional commitment
- Shows sellers/real estate agents you’re serious
 Mortgage Pre-Qualification vs. Mortgage Pre-Approval https://www.thetruthaboutmortgage.com/pre-qualification-vs-pre-approval/
 How long does a mortgage pre-approval last? https://www.yourmortgage.com.au/home-loan-guide/how-long-does-a-mortgage-preapproval-last/253964/
 How long does it take to get pre-approved for a mortgage? https://themortgagereports.com/27202/how-long-does-it-take-to-get-pre-approved-for-a-mortgage
 How Long Is Mortgage Pre-Approval Good For? https://www.realtor.com/advice/finance/how-long-pre-approval-lasts/
 How Long Does a Mortgage Pre-Approval Last? https://listwithclever.com/real-estate-blog/how-long-does-mortgage-pre-approval-last/
 How Long Does a Mortgage Pre-Approval Take https://thelendersnetwork.com/how-long-does-a-mortgage-pre-approval-take/
 Understanding Mortgage pre-approvals https://www.whichmortgage.ca/article/understanding-preapprovals-118340.aspx