How Early Should You Get Pre-Approved for a Mortgage?

Young couple getting a mortgage pre-approval

Pre-approval is a standard step that prospective homeowners must complete before they go house hunting. This stage lets you know how much a bank is willing to lend you.

Getting pre-approved is a detailed process that requires extensive documentation. In addition, your mortgage rate has an expiration date. If house shopping lasts longer than you anticipate, you may have to get another pre-approval. Here is what you need to know.

What Is a Mortgage Pre-approval?

During a mortgage pre-approval process, a lender reviews your financial status, including your income, assets, debts, expenses and credit score. Unlike a mortgage pre-qualification, which tells you how much financing a lender might extend, pre-approval is a commitment to loan the funds under certain conditions.

When Should You Apply for Pre-approval?

Typically, mortgage pre-approval is valid for a set term such as 60, 90 or 120 days. Because the house hunting process may take some time, it is a good idea to get a pre-approval as soon as possible.

However, remember that your rate and the terms of the pre-approval depend in part on your credit score. So, it is a good idea to review your credit information before applying. If there are errors on your report, or if you have high debt balances or any other factors that are contributing to a low credit score, you may want to resolve those first.

Many people seek approval from a few different lenders. When you apply, this creates a hard inquiry on your credit report. Hard inquiries negatively impact your credit score, at least temporarily. However, if you are shopping around for a mortgage, this is usually counted as one hard inquiry. That’s as long as multiple inquiries occur within a short period, like a few weeks.

The amount of your pre-approval is the maximum loan you can get. Your house may cost less, or you may have a large down payment that reduces the amount you have to borrow. Remember, you still have to cover closing costs on your home purchase.

When Might You Need to Reapply?

Most lenders describe the rates as locked in. But recall that the pre-approval comes with conditions. If there are changes to your financial status before you buy a home, the lender may withdraw the approval. That’s why it’s important to maintain your credit rating and your healthy financial status until the purchase closes. Also, ask your lender if you can get a lower rate if mortgage rates go down during the locked-in period.

If you haven’t found a home before the pre-approval expires, you may have to reapply. Sometimes a lender will extend the time of the previous approval. Of course, if your financial situation has changed, you may choose to reapply or suspend your house-hunting efforts until your situation improves.

How Do You Start the Process?

Most lenders give you the option to apply for pre-qualification or pre-approval online. You may have to present additional documents or meet with an advisor in person. Remember, to review current mortgage rates from various lenders as part of your house-hunting process.

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