How long does a mortgage pre-approval take? – Councilor Forbes


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If you’re about to buy a home, your first step should be to get a mortgage pre-approval letter from a lender.

A pre-approval letter tells the seller that you are seriously considering buying the house and shows how much you can afford to buy the house. However, you’ll need to act fairly quickly, as the pre-approval won’t last forever. Some banks have pre-approvals for 30 days, while others are up to 60 days or more. Make sure you keep an eye on the expiration date, and if you don’t have a house contract by then, try getting an extension or working with another lender.

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

What is mortgage pre-approval?

Pre-approval for a mortgage occurs when you get an interim commitment for a loan from a lender. Keep in mind that the loan amount shown on the pre-approval letter may not match the final approved mortgage amount. It may be less than the letter amount, but you won’t get more in the final loan amount unless you request another pre-approval at a higher amount. The letter also includes an interest rate that you can lock in after the approval process begins.

A pre-approval letter means that a lender has performed a credit check on you, which temporarily rings your credit score, has reviewed documents (such as recent pay stubs and tax returns), and believes you are a creditworthy borrower.

It is not a guarantee that you will get a loan, as loan underwriters should always look at your full income and credit history. But this will give the home seller as much insurance as possible that you can afford the home.

How is pre-approval different from prequalification?

You might be tempted to simply get a prequalification letter before purchasing homes, as it’s faster than pre-approval. But if it doesn’t go through the same rigorous process as pre-approval, it’s not as reliable.

While some lenders can use the words pre-approval and prequalification interchangeably, you will often find that prequalification is a quick process that can get an immediate response from a lender. In this type of prequalification, the lender will ask you to declare your income, debts, and other financial information.

But there is one major difference. While prequalification requires a gentle credit check, pre-approval likely requires a serious credit check and review of financial documents so that a lender can say with some confidence that you are ready to get a loan in a specified amount. While a prequalification is primarily based only on the information you provide and your credit score, and won’t mean as much to a seller.

Prequalification can be useful if you are very early in the home search process and want to do a quick check with a lender. This would give you an estimate of how much loan you can afford and a chance to resolve income and debt issues before getting pre-approved. Pre-approval, on the other hand, is best when considering purchasing a particular home.

How do you get pre-approved for a mortgage?

The most important task for a potential owner looking for a pre-approval letter is to gather all the necessary documents.

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

The pre-approval process will cover:

  • Income. You will need to provide recent pay stubs, often the last two pay periods, that show how much you earn and prove employment. Stable income is an important requirement for any mortgage.
  • Assets. Your bank statements and investment accounts will give you a better idea of ​​how much money you may have available, which is especially important if your income is low or irregular.
  • Credit. A lender will perform a thorough credit check to examine your current score and the last few years of your credit history. Keep in mind that mortgage lenders look at a score from all three credit bureaus, which may be different from the score you see on free score check websites or through your credit card company.
  • Debts. You will need to make a list of the debts you have, which will help the lender understand your debt-to-income ratio (DTI). This ratio is essential in determining how much of a mortgage you can afford.

How Long Can a Mortgage Pre-Approval Take?

Pre-approval of the mortgage can take up to 10 days, in part due to the process of submitting and reviewing financial documents.

You can try to speed up the process by gathering all the documents you will need up front and providing them to the lender immediately.

If you are considering buying a particular home and you don’t have a pre-approval letter, you’re probably going to miss it, as sellers generally prefer buyers who are already pre-approved for financing. If you don’t have one, the problem is, you won’t get approved for a mortgage and the deal will fail.

How pre-approval affects my credit score

A mortgage pre-approval requires a serious credit check that results in a thorough investigation of your credit report, which can lower your score by up to five points for a 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 investigation, request your free credit report from the three offices months before your scheduled pre-approval request so that you can correct any errors that may appear and take steps to improve the case. As a result, your score could increase, which means you will get a better interest rate and better terms on your mortgage.

Should you get more than one pre-approval?

When trying to get the best deal on a mortgage, you might get lucky with the first lender on a pre-approved. But you’ll probably want to shop around and check with several mortgage lenders. Keep in mind, however, that if you request a pre-approval letter with each lender, it will likely affect your credit score with each check. It might be more advantageous to do a prequalification first; or ask the lender for a general idea of ​​what they can offer based on your knowledge of your current credit score and financial information.

Several factors can influence your decision on the best loan deal, including the interest rate, fees, and whether the loan has a low down payment and / or down payment assistance. You can also find other important factors, such as the length of the pre-approval letter, the length of time the lender allows you to lock in an interest rate, and the proximity or customer service of the lender.

In a competitive real estate market, you want to be at the forefront if there is a bidding war for your dream home. Make sure you take the time to get it right by preparing your paperwork, accurately detailing your debts, and getting pre-approved so you can be well prepared to win your bid.

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