One of the first steps you should take before you shop for a home is to get pre-approved. There’s nothing more solidifying for the seller than to see that you’ve already been pre-approved by a lender. If this is the first thing you do, though, you should know how long the pre-approval lasts.
The Average Expiration of a Pre-Approval
Most lenders make a borrower’s pre-approval good for 60-90 days. It’s very rare that you’ll find a lender that will provide a pre-approval for longer than 3 months. You’ll know exactly how long your pre-approval lasts by looking at the letter the lender provided. On the letter it will state what date you are pre-approved through. This means if you don’t find and buy a home before this time, you will have to go through the pre-approval process again.
Why Do Pre-Approvals Expire?
In reality, 90 days is a long time to give you a pre-approval. Think about your finances and how much can change in 90 days. You can lose your job, change jobs, get a new loan, overspend on your credit cards, get a raise, or go back to school in that time and that’s just a sampling of what you can do.
If you haven’t found a home before 90 days are up, the lender will need to re-verify your income, assets, debts, and credit score. They need to make sure that they have the most up-to-date information on your finances. Typically, getting pre-approved again requires a few simple steps if you stay with the same lender as they just need to update your information by looking at updated paystubs, asset statements, and your credit report.
Is a Pre-Approval Different From a Pre-Qualification?
Don’t make the mistake of confusing a pre-qualification with a pre-approval – they are two different things. The pre-qualification doesn’t hold as much weight as a pre-approval. The pre-qualification is basically an estimate from the lender based on the information you provide. A pre-qualification is only good to estimate how much you can afford before you are serious about shopping for a home.
When you are ready to shop for a home, though, it’s a good idea to get the pre-approval. In order to obtain it you will have to provide your lender with proof of your income, assets, and credit. The lender will do a deep evaluation of the documents you provide in order to provide you with the pre-approval letter.
The pre-approval letter is based on certain conditions, though. It’s not a clear approval. Within the letter, the lender will state the conditions you must satisfy in order to be able to close the loan. The most common condition is the appraisal of the property you intend to purchase, as that is the collateral used for the loan.
When Should You Get Pre-Approved?
Since pre-approvals do expire, you’ll have to time it perfectly. You don’t want to get it too soon before you start shopping for homes, but you also don’t want to take too long. Some sellers won’t even show you their home if you don’t have the pre-approval in hand, so keep that in mind.
Your pre-approval should last you long enough to find a home, but on the off chance that it doesn’t, you can always get pre-approved again. Just be prepared to provide your lender with the documents needed to extend your pre-approval.