How Long Does a Prequalification Letter Last?

A prequalification letter serves as an initial step in understanding your financial standing for homeownership. It provides an early estimate of how much you might be able to borrow, helping to set expectations for your home search. This preliminary assessment allows prospective homebuyers to gauge their affordability before diving deeper into the real estate market.

Understanding Prequalification

A prequalification letter is a lender’s informal estimate of your borrowing capacity, based primarily on financial information you provide without formal verification. Lenders consider aspects such as your reported income, existing debts, and available assets during this initial assessment. This quick evaluation offers a general idea of a reasonable budget for home shopping. It helps individuals understand what loan amount they might qualify for, serving as a guideline for their property search.

Standard Validity Period

The duration a prequalification letter remains valid is not fixed, as it is based on self-reported, unverified information. Unlike a pre-approval, which often has an explicit expiration date of 60 to 90 days, a prequalification is more of a snapshot of your financial situation at a given moment. Its practical validity hinges on whether your financial circumstances remain consistent with what you initially reported. Should your financial profile change, the estimate provided by a prequalification may no longer be accurate.

Factors Affecting Duration

Several factors can cause the underlying assessment of a prequalification to change, impacting its practical usefulness. Significant alterations in your financial situation, such as a job loss, a decrease in income, or taking on new substantial debt like a car loan, can invalidate the initial estimate. Changes in your credit score, whether due to new credit inquiries or missed payments, also play a role, as lenders use creditworthiness to determine loan eligibility. Fluctuations in market interest rates can affect the amount you might qualify for, necessitating an updated assessment.

What to do When it Expires

When your prequalification letter’s underlying financial assessment is no longer current, contacting your lender is the appropriate next step. You will need to provide updated financial information to reflect your current income, debts, and assets. The lender may then conduct a new soft credit pull to get an updated credit snapshot, which does not negatively impact your credit score. Having a current and accurate financial assessment is important, especially as you prepare to make an offer on a home.

Prequalification Versus Pre-approval

While both prequalification and pre-approval offer an estimate of your borrowing power, they differ significantly in their depth and impact. Prequalification relies on self-reported financial information and involves a soft credit check, providing a general estimate of what you might afford, and is a less formal process that can be completed quickly. Pre-approval, conversely, is a more rigorous process where the lender verifies your financial documents, including income, assets, and debts. This often involves a hard credit pull, which can temporarily affect your credit score, but it results in a conditional commitment from the lender for a specific loan amount. A pre-approval letter carries significantly more weight with real estate agents and sellers, signaling that you are a serious and financially vetted buyer.