How Long Is A Pre-Approval Valid When Shopping For A Home
How Long Is A Pre-Approval Valid When Shopping For A Home:
- A pre-approval letter is a ticket for home buyers to go and enter into a real estate purchase contract and 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 home 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 valid for
- 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
How Do Lenders Pre-Approve A Borrower And How Long Is A Pre-Approval Valid?
It does not take long to qualify 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
Step In 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
- 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.
Verification Of Employment For Borrowers With Marginal Income
If the borrower is not sure of his or her income due to multiple jobs or how long they have had over time, bonus, or part-time income, verification of employment may be required prior to issuing a pre-approval.
- Documents such as tax returns, W-2s, recent paycheck stubs, bank statements may be required by the loan officer prior to issuing a pre-approval
- Once the loan officer has examined your mortgage loan application, credit history, credit scores, liabilities, and assets, you will then be issued a pre-approval
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.
- A pre-approval is only valid as long as you maintain your good credit 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.
How Long Is A Pre-Approval Valid: Do Not Change Jobs
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
Home buyers 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 home buyers to get excited about moving to a new home and they go on a shopping spree and purchase new furniture,
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 ratios.
For more information about the contents of this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at [email protected]