This guide cover how long is a pre-approval valid when shopping for a home. A pre-approval letter is a ticket for homebuyers to go and enter into a real estate purchase contract and the transaction is likely to close. A pre-approval letter is not a guarantee that the mortgage loan application is guaranteed a residential mortgage loan. But the likelihood of happening is 99 plus percent unless the loan officer screwed up.
Most buyers who have issued a pre-approval letter close on their home loans unless special circumstances happen during the mortgage approval process. Many loan applicants ask the question of how long a pre-approval is valid.
A pre-approval can be valid indefinitely. This holds true as long as the mortgage loan applicant maintains his or her credit, has a job, and has no derogatory credit items since the pre-approval letter has been issued. Loan officers need to properly qualify a home buyer in the early stages prior to issuing a pre-approving a home buyer and issuing a pre-approval letter. In the following sections, we will cover how long is a pre-approval valid for when shopping for a home. Speak With Expert For Mortgage Aprroval, Click Here
How Long is a Pre-Approval Valid?
How long is a pre-approval valid can be indefinite as long as there are no negative changes in the borrower’s credit or income profile. It does not take long to qualify as a home buyer and to get a pre-approval letter issued. Hourly and salaried home buyers can get pre-approved within an hour of contacting a mortgage loan originator. Self-employed home buyers, home buyers with commission income or 1099 income may take some time before a loan officer can pre-approve them. This is because they need to review their 2 years tax returns to determine their gross adjusted income.
Mortgage loan pre-approval is the amount of money they are willing to lend you for a home purchase. Getting pre-approved gives you a clear understanding. We will cover the key steps involved in the mortgage loan pre-approval process. Mortgage lenders need to gather financial documents such as income verification, asset verification, bank statements, investment account statements. Employment information is required.
Documents Required Prior To Pre-Approval
An experienced loan officer should collect the following documents:
- two years tax returns
- two years W-2s, and most recent paycheck stubs
- if the borrower had a prior foreclosure or deed in lieu of foreclosure, the loan officer should research the foreclosure and deed in lieu of foreclosure prior to issuing a pre-approval letter
- If I were a home buyer and counting on a mortgage loan officer to give me a pre-approval letter, I rather wait an extra day or two and make sure the pre-approval letter is solid and valid
- The wait is worth it than taking a chance of getting a pre-approval letter that is not solid where my mortgage loan process can be halted because my loan officer did not properly qualify me
Complete a Pre-Approval Application
Research and compare mortgage lenders. Submit a mortgage pre-approval application to the chosen lender. This may be done online, over the phone, or in person. The lender will review. If approved, the lender will issue a pre-approval letter. This document outlines the loan amount you’re qualified for, the interest rate, and any conditions that must be met.
It’s important to note that pre-approval does not guarantee you’ll receive a mortgage loan, as the property you choose must also meet the lender’s criteria.
Proof of employment and any additional sources of income. A higher credit score generally results in better loan terms. Additionally, your financial situation must remain stable between pre-approval and closing. Remember that different lenders may have slightly different processes, so it’s essential to communicate with your chosen lender and follow their specific requirements.
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Steps To Getting Pre-Approved For a Mortgage
The first step towards getting pre-approved is for the home buyer to complete a 4-page mortgage loan application called 1003. Once they complete 1003, the loan officer will run a tri-merge credit report. The loan officer will review the credit report. Loan officers will look at items such as the following:
- recent payment history
- prior bankruptcy
- foreclosure
- deed in lieu of foreclosure, or short sale
- and if the borrower had a prior bankruptcy or foreclosure
- the loan officer will see if the bankruptcy and foreclosure have met the waiting period and seasoning requirements
- The loan officer also needs to check when the foreclosure and/or deed in lieu of foreclosure has been transferred out of the borrower’s name into the name of the lender
This is because the waiting period starts from the recorded date of the foreclosure.
Pre-Approval Can Be Null and Void During Home Shopping Process
Just because you were issued a pre-approval does not mean that it is good indefinitely. How long is a pre-approval valid? The pre-approval is only valid as long as you maintain your good credit and income standings such as the following:
- have assets
- do not withdrawal assets
- stay employed
- do not incur any new debt like a new car payment
- debt to income ratios are in line
- do not apply for new credit
- and will continuously be financially responsible until you close on your home loan
Bank statements will be asked for continuously by your lender until you close on your home loan. Verification of employment will be asked for more than one time. Verification of rent will be asked for more than once. A credit check will be pulled on you more than once during the mortgage process.
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How Long is a Pre-Approval Valid: Do Not Change Jobs
How long is a pre-approval valid depends if the borrower had any changes in their credit or income profiles. Income and your job stability is the most important factor besides your credit and credit scores when qualifying for a mortgage loan. Please do not quit your job or change jobs until you have closed on your home loan. If you decide to quit your job and take a few months off and live off reserves, you will not close on your home loan. If you decide to change jobs to another full-time job, there will be delays in closing your home loan. If you decide to quit your full-time job and start your own business, you cannot qualify for a home loan for at least 2 years. If you decided to quit your full-time job and have several part-time jobs, you will not qualify for a home loan for at least two years.
How Long is a Pre-Approval Valid: Do Not Apply For New Credit
Homebuyers with solid pre-approval letters should never apply for new credit. Not only does a credit inquiry needs to be explained via a letter of explanation. But that extra monthly payment may disqualify you for your mortgage loan if it exceeds your debt to income ratios. One of the biggest reasons for last-minute mortgage loan denials is due to high debt to income ratios. It is normal and common for homebuyers to get excited about moving to a new home and they go on a shopping spree and purchase new furniture, How long your pre-approval is valid depends on your credit and income profile the time you got qualified. If your credit and income situation changed, that pre-approval is no longer valid.
Co-Signing For Loan During Mortgage Approval Process
Never ever co-sign for a loan for anyone during the mortgage approval process or prior to the mortgage approval process. Co-signing for a loan, whether it is a car loan or home loan, will definitely affect your debt-to-income ratios and can be a deal killer if you already have a higher debt-to-income ratio. So the answer to how long is a pre-approval valid for, there is no expiration date. As long as the borrower remains employed and has the assets and credit, the answer is no expiration date on how long is a pre-approval valid. For more information about the contents of this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
How Long Does Pre-Approval Take To Get Issued?
A loan originator can issue a pre-approval letter as soon as they get at least three items from the applicant. Two years tax returns, two years W-2s, and most recent paycheck stubs. Once the loan originator runs credit and reviews the mortgage application and reviews these three items, he or she can issue a pre-qualification letter but not a pre-approval.
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