If you’re just starting the process of looking into a mortgage, you might be wondering how the pre-approval process works and how far in advance you need to get your pre-approval before shopping around. We’re here to answer all your questions, but first, let’s start with the basics.

WHAT IS A PRE-APPROVAL?

A pre-approval is the process that helps you and the mortgage company understand how much money you can borrow to buy your home. There are a few factors that help determine this amount such as your debt-to-income ratio, credit score, and other assets. These factors influence the loan products you could be approved for, your interest rate, and the total amount you can borrow.

PRE-APPROVAL VS. PRE-QUALIFICATION

These two terms are easily confused by a lot of borrowers: so what’s the difference?

Pre-Qualification is the first step and actually comes before the pre-approval in the process. Pre-qualification is usually a pretty quick and informal process of giving your lender an overview of your financial standing. This is typically done over the phone, during an initial consultation, or by filling out a brief online form with information about your credit score, as well as your current debt and income ratio. This will give you a general estimate of the loan amount you could borrow for your home, but it does not guarantee you will be approved for that amount. This is also an opportunity to speak with your loan officer about which loan product might be right for you, and get your initial questions answered about the process.

Pre-Approval: Pre-approval is granted after filling out a complete mortgage application with your lender. This means that you will have to provide more detailed information such as your social security number, driver’s license, tax documents, proof of employment, and other statements regarding your debt and income. At this point, a credit check will also be performed. Once you are pre-approved, you will receive a pre-approval letter which is an offer (not a commitment) to lend.

HOW LONG DOES THE PRE-APPROVAL PROCESS TAKE?

The pre-approval process usually takes about 1-3 days once all your paperwork is submitted.

HOW LONG DOES A PRE-APPROVAL LAST?

A pre-approval letter can last anywhere between 60-90 days. This is because a lot can happen with anyone’s personal financial situation within 2-3 months, and lenders want to be sure that they are always providing an accurate picture of your financial standing to the sellers of the future home you’re looking to buy.

If your pre-approval does expire – no worries! Just reconnect with your lender, provide your updated paperwork, and you can get a new one. This usually doesn’t take too long either since they already have the bulk of your information on file.

HOW FAR IN ADVANCE SHOULD I GET PRE-APPROVED?

The best time to get pre-approved is right before you start shopping for a home. This is the best way to know how much you can afford, and it also gives you a better chance of having an offer accepted on a home over someone who does not already have a pre-approval letter in hand.

FINAL RECOMMENDATIONS

It’s important to know that the amount you get pre-approved to borrow might not always be the amount you should borrow. Our loan officers are here to help you determine the right loan amount and mortgage payment for your current budget and financial situation. Please feel free to reach out at any time – even if it’s just to say hi or ask a simple question.

Our family is here to help yours!