How long does a mortgage preapproval last? Is there an expiration date on preapproval?
What happens after the preapproval period has expired? All these questions and more will be answered in this article so keep reading!
If you’re applying for a mortgage, your lender may require you to get preapproved. Preapproval is the first step of the mortgage approval process and can give you a jump-start on the homebuying process.
Generally, once a lender preapproves you for a loan amount, the approval will last for approximately 90 days.
So how does that work?
How Mortgage Preapproval Works
A mortgage preapproval is a process that helps give you an idea of how much of an offer you should make on a property.
Preapproval usually doesn’t involve a credit check and should take under an hour. It involves a visit to your bank or lender’s branch, where you’ll meet with a loan officer and fill out some paperwork.
The loan officer will ask questions about your employment, income, and expenses to determine your financial capability to buy a home.
A credit check will likely be part of the final approval process, which is called mortgage approval or underwriting.
This is a much more detailed process and requires you to turn over documents such as pay stubs, tax returns, and bank statements.
But getting preapproved can help you feel more confident during the home buying process because it can show sellers that you’re ready to make an offer on their property.
If you’re applying for an FHA loan or a conventional loan through the Department of Veterans Affairs, the approval process won’t be as rigorous as it would be if you were applying for a jumbo loan. But it’s still important to do your homework and understand the process before you apply.
Details vary among lenders, but here’s how it generally works:
- You fill out an application for preapproval. Some lenders will require that you complete this form online; others will mail one to you.
- The lender reviews your application and credit report and determines what kind of loan amount you can finance and at what rate. This step is called underwriting, but don’t worry — most lenders will give you a good idea of your approval prospects before they start crunching numbers.
- The lender submits the underwriting information to the underwriter (a separate company) and orders a credit report.
- You get your approval letter in the mail, at which point you can put an offer on a house, provided that your mortgage broker is working with an approved mortgage lender, too.
Related: How to Get a House with Bad Credit
Why Should You Get a Mortgage Preapproval?
You should consider getting pre-approved for a mortgage when you start looking for your dream home; this way, you can act quickly when the right property comes up.
A pre-approval is an early estimate of what you may qualify for with a particular lender. Your offer to purchase a home is contingent on receiving final approval of your loan (meaning it will depend entirely on what amount the lender agrees to lend you).
A pre-approval gives sellers confidence that you are serious about purchasing their property and provides a sense of security and trust to them.
With this in mind, they may be more eager to accept your offer and end up accepting a lower price than they might otherwise have done.
Pre-approval is also useful to have if you are considering making an offer on more than one property at the same time.
This way you can focus your efforts on one deal knowing the other is already in process.
How Long Does it Take to Get Mortgage Preapproval?
The process usually takes around 7 business days but can be quicker or longer depending upon credit checks and other factors.
Types of Mortgage Preapprovals
There are two main types of mortgage preapprovals: conventional and FHA.
Conventional preapprovals are issued by banks and lenders, while FHA preapprovals come from the Federal Housing Administration.
FHA mortgage loans can be used to finance homes that cost less than $314,000 in 2017. Conventional mortgages are available for homes that cost more than the limit.
Related: 9 Different Types of Mortgage Loans
Mortgage loan preapprovals don’t mean you have a guaranteed loan, but they do tell you what’s possible and how much you can borrow based on current interest rates and your income. Here are some factors to consider when choosing between an FHA mortgage or conventional mortgage:
Borrowers who don’t have stellar credit scores may want to opt for an FHA mortgage. The FHA has minimum requirements for credit scores (as low as 500) and debt-to-income ratios (less than 43 percent).
By comparison, conventional loans typically require better credit scores (620 or higher) and debt-to-income ratios ($43,100 or less) for approval.
Minimum down payments also vary between the two types of loans — 3.5 percent for an FHA loan versus 5 percent for a conventional mortgage.
So, How Long Does a Mortgage Preapproval Last?
It depends on the lender.
Most lenders do not give an expiration date, but some do. If a lender gives you a preapproval letter, they usually state that the approval is good for 30 days.
However, if you find your dream house within those 30 days and make an offer, it is likely that the lender will extend the approval period until they have time to review your financing package.
So don’t worry if your approval expires before you buy a home! Just contact your lender to request an extension.
If your lender doesn’t give you expiration date, call them to check on the status of your application every 30 days or so.
If they haven’t made a decision by then, ask them how soon they expect to decide.
This is particularly important if you are trying to purchase in a competitive market where properties are going fast, such as a resort community or popular area during peak season.
Requirements for Getting Mortgage Preapproval
If you’re considering buying a home, it’s important to know what the requirements are for getting a mortgage preapproval.
This will give you a good idea of how much you can afford before you begin looking at properties.
Mortgage pre-approval is different from getting a mortgage approval. Pre-approval means that you have been approved for the amount that you want to purchase a home with.
Mortgage approval is your lender’s final decision on whether or not they will give you a mortgage.
It can take some time to go through the process of getting pre-approved, but it can be worth it if it saves you from having to make multiple visits with your lender and real estate agent as well as from wasting your time looking at homes that are out of your price range.
Before you get started on your way to preapproval, there are some basic things that you’ll need in order to get this type of loan.
You’ll need information about yourself, including:
- Your social security number
- Your income
- Your assets and debts
- You’ll also need information about the home that you want to purchase, including the state where the property is located, the county, and the home’s legal description.
- A decent credit score
- A good debt-to-income ratio
- Personal information like your name, address, contact details, and employment information.
Is There An Expiration Date on Preapproval?
No, but if the approval expires before closing on a house, then it can be assumed that you will no longer qualify for it.
There is no set expiration date on mortgage preapproval. Some lenders may give you a specific date or date range, but this is not a requirement.
The lender will let you know when they need to receive your documents and information in order to finalize the approval process.
What Happens After Preapproval Period Has Expired
Mortgage preapproval is a great thing to have, but you should be aware that the preapproval period will expire at some point. There are several reasons why you can no longer be preapproved for a mortgage.
Preapproval Period Expiring
The lender will give you a certain amount of time in which you can purchase a home and still be preapproved. This period of time varies by lender but usually ranges from 4-6 weeks, although it can be as little as 2 weeks or as long as 8 weeks.
Once this period has passed, your mortgage application is placed into “pending” status until they receive further information or documents from you. You will then need to reapply for preapproval if you would still like to use this lender.
Borrower/Loan Matches no Longer Exist
You may have found the home of your dreams and have applied for a mortgage while being preapproved in the hopes that you can purchase it within the time frame given. Unfortunately, the bank may not approve your financing because the borrower has changed (you now make more money) or the loan has changed (you are purchasing more expensive property).
Prolonged Application Process
If you don’t buy a home by the end of the preapproval period, your lender will most likely ask for additional financial information and require a new credit report.
This can prolong the application process, which means you lose valuable time that you could have been spending house-hunting.
If you stay in the same home or refinance your mortgage, then nothing happens because your lender already has your financial information on file.
But if you move or switch lenders, it’s up to you to inform the mortgage company that provided your preapproval about your new address so they can send any necessary documents to the correct place.
Final Thoughts: How Long Does a Mortgage Preapproval Last?
So, how long does a mortgage preapproval last? That’s where things get a little bit hazy.
Generally speaking, as long as you stay within the price range that you have been approved for, and you don’t try to get a lower down payment, you will be fine.
However, if your financial situation changes dramatically – you lose your job or decide to take on a side gig to cover extra expenses – you may have to reapply again to get your mortgage preapproval reinstated.
Also Read: How to Find a Mortgage Lender