How Long Is a Mortgage Approval Good For?
Learn the lifespan of your mortgage approval. Understand the factors that affect its validity and what steps to take if it expires.
Mortgage approvals have specific timeframes that homebuyers need to understand. Knowing how long these approvals remain valid helps individuals plan their home search and prepare for the financial steps involved in securing a mortgage. This understanding can streamline the property acquisition process and prevent unexpected delays.
Understanding Mortgage Approval Types
The initial step for many homebuyers involves a pre-qualification, which provides a preliminary estimate of what a person might be able to borrow. This stage relies on self-reported financial information, such as income, assets, and debts, without requiring extensive documentation or a credit check. While a pre-qualification offers a general idea of borrowing capacity, it is not a firm commitment from a lender.
A more thorough evaluation occurs during the pre-approval process. Here, a lender reviews documented financial information, including pay stubs, bank statements, tax returns, and W-2 forms. A hard inquiry on the applicant’s credit report is also part of this stage, allowing the lender to assess creditworthiness. A pre-approval represents a conditional commitment from a lender for a specific loan amount, demonstrating serious intent to purchase a home.
The final stage of mortgage approval is the commitment letter, also known as a loan commitment. This formal document is issued after the underwriting process is complete and all conditions for the loan have been satisfied. A commitment letter details the specific loan terms, including the loan amount, interest rate, and repayment period. This letter signifies the lender’s definite agreement to provide financing for a particular property, contingent on the closing of the transaction.
How Long Mortgage Approvals Last
A mortgage pre-approval remains valid for a period ranging from 60 to 90 days. Some lenders may issue letters with shorter 30-day limits, while others might extend validity up to 120 days. This timeframe is common because financial situations and market conditions can change rapidly. The pre-approval letter itself will specify its expiration date, guiding the homebuyer on their search timeline.
Several factors can influence a pre-approval’s validity. Lender policies vary, with each institution setting its own standard validity periods. Changes in a borrower’s financial situation, such as shifts in income, employment status, debt levels, or credit score, can impact the continued validity of the approval. For instance, a significant increase in debt or a drop in a credit score could necessitate a re-evaluation of the loan terms.
Market interest rate fluctuations also play a role; substantial shifts can require a re-assessment of the approved loan amount and terms. The property appraisal itself has a validity period, which can indirectly affect the loan’s approval if it expires before the scheduled closing. The commitment letter, representing the final approval, is tied to the specific closing date of the property being purchased.
What to Do When Approval Expires
If a mortgage pre-approval is nearing its expiration date or has already expired, the homebuyer should proactively contact their lender. This communication is important to discuss the necessary steps for renewing or extending the pre-approval. Lenders often have a streamlined process for expired pre-approvals, especially if the borrower’s financial situation has remained stable.
The lender will require updated documentation to verify the borrower’s current financial standing. This often includes recent pay stubs, updated bank statements, and potentially a new credit check. These documents allow the lender to confirm continued eligibility and ensure no significant changes have occurred since the initial pre-approval. The re-verification process helps maintain the accuracy of the financial assessment.
The terms of the loan, such as the interest rate or the maximum loan amount, might change based on current market conditions or updated financial information. Depending on changes to the borrower’s profile or market conditions, the process might involve a simplified re-qualification or a more comprehensive re-application. Renewing an expired pre-approval is a standard part of the home-buying journey if the property search extends beyond the initial validity period.