How Long Are Preapproval Letters Good For?

A mortgage preapproval letter signals a buyer’s financial readiness to lenders and sellers. Issued by a lender, this letter provides a preliminary commitment to lend a specific amount, based on an initial review of a borrower’s financial standing. It outlines the potential loan amount and terms, offering a realistic budget for a home search. This commitment is temporary, reflecting dynamic personal finances and economic conditions.

Typical Validity Period

A mortgage preapproval letter is valid for 60 to 90 days, though validity periods range from 30 to 120 days. This timeframe accounts for shifts in a borrower’s financial situation and market volatility. Lenders set these expiration dates because income, credit history, and interest rates can change, ensuring the preapproval’s financial basis remains current and accurate.

Factors Influencing Validity

A preapproval letter can lose validity before its expiration date. Changes to a borrower’s financial profile, such as a decrease in credit score, a change in employment, or a reduction in income, can affect the lender’s willingness to extend original loan terms.

Accumulating new debt, like an auto loan or new credit card accounts, also impacts the debt-to-income ratio. Such changes may lead to a reassessment or rescission of the preapproval. Fluctuating interest rates or shifts in lending guidelines can also alter the terms, necessitating an update. Borrowers should promptly communicate any material financial changes to their lender.

Renewing or Updating a Letter

If a preapproval letter is nearing expiration or has expired, a borrower must renew or update it. This involves resubmitting updated financial documentation. Lenders request recent pay stubs, bank statements, and updated tax documents to verify income and assets.

An updated credit check will also be performed to review the borrower’s current credit score and history. This re-verification ensures continued eligibility. The renewal process helps maintain borrowing power and avoids delays in the home-buying process.

Prequalification vs. Preapproval

Mortgage prequalification and preapproval represent different levels of financial scrutiny. Prequalification is a less formal estimate, based on self-reported financial information without extensive verification. It provides an estimate of what a borrower might afford, serving as an initial step for understanding budget.

In contrast, mortgage preapproval involves a thorough financial review, where the lender verifies income, assets, and debts by examining documentation. This process includes a hard credit pull, providing a comprehensive view of the borrower’s credit history. A preapproval letter carries more weight with sellers and real estate agents, demonstrating a buyer’s serious intent and verified capacity to secure financing.