When You Get Preapproved For a Mortgage How Long Is It Good For?

Mortgage pre-approval provides a preliminary assessment from a lender regarding how much money you might be able to borrow for a home purchase. This step offers a clear understanding of your potential purchasing power before you begin seriously looking at properties. It demonstrates to sellers that you are a serious and qualified buyer, which can be an advantage in a competitive market.

What Mortgage Pre-Approval Means

Mortgage pre-approval involves a lender evaluating your financial health to determine the maximum loan amount you qualify for, along with potential interest rates. This process includes a review of your credit history, income, and existing debts. Lenders pull your credit report to check your FICO scores, which need to be at least 620 for conventional loans, and they verify your employment and income through documents like W-2 forms, pay stubs, and tax returns. They also calculate your debt-to-income (DTI) ratio, which compares your monthly debt payments to your gross monthly income, aiming for a ratio below 43%.

This detailed financial review makes pre-approval a much stronger commitment from a lender compared to pre-qualification. Pre-qualification is an estimate based on information you provide, without verification. Pre-approval, conversely, involves a hard credit inquiry and verification of your financial documents, providing a more concrete indication of your borrowing capacity. This distinction helps you set realistic expectations for your home search and can make your offer more attractive to sellers.

Standard Validity Period

A mortgage pre-approval is valid for a timeframe ranging from 60 to 90 days. This duration allows lenders to ensure that the financial information they assessed remains current and accurate. The housing market and lending environment are dynamic, with interest rates and property values subject to change. Your personal financial situation can also evolve, impacting your eligibility.

Lenders set these limits because the financial landscape, including prevailing interest rates and economic indicators, can shift. For instance, if the Federal Reserve adjusts its monetary policy, it can influence mortgage rates, potentially altering the affordability of a loan. A pre-approval acts as a snapshot of your financial standing and market conditions at a particular moment. Extending beyond this period without re-evaluation would expose both the borrower and the lender to unnecessary risk.

Factors Influencing Pre-Approval Duration

Several circumstances can impact the validity of a mortgage pre-approval, even within its standard timeframe. Changes to your personal financial situation are a primary concern for lenders. A drop in your credit score, perhaps due to missing payments or taking on new debt like a car loan, can jeopardize your pre-approval. A job change, even if it comes with a higher salary, may require the lender to re-verify your employment stability and income, particularly if it involves a new industry or a probationary period.

External factors also play a role in how long a pre-approval remains effective. Shifts in interest rates, for example, can alter the amount you can afford to borrow. If rates increase, your purchasing power may decrease, necessitating a new pre-approval for a lower amount. Changes in lending guidelines, which periodically occur due to regulatory adjustments or market conditions, could also affect your eligibility or the terms of your potential loan. Any of these events warrant a re-evaluation by your lender.

Steps When Pre-Approval Nears Expiration

As your mortgage pre-approval approaches its expiration date, or if it has already passed, contacting your lender promptly is the next step. Your lender will guide you through the process of extending or renewing your pre-approval. This involves providing updated financial documentation to reflect your current situation.

You will need to submit recent pay stubs for the last two to three months, and bank statements covering the past 60 days. If your income structure has changed, or if it involves self-employment, updated tax returns or profit and loss statements may be required. The lender will also perform another credit check, which will result in a new hard inquiry on your credit report. This updated information allows the lender to re-confirm your eligibility and adjust the pre-approval terms if necessary, ensuring it accurately reflects your current financial standing and market conditions.