When it comes time to buy a home, you need to get your ducks in a row. That means doing several things. Having your down payment ready, knowing what you want in your home, and finding the right real estate agent. And don’t forget about that pre-approval! But how long is a pre-approval good for?
Pre-approval: The process of finding out how much you could be allowed to borrow for your home, the interest rate you will get, and how much your monthly payments could be.
You can get pre-approved from any bank or mortgage lender – it doesn’t have to be one you already bank with.
Tip: Shop around to see what different mortgage lenders and banks have to offer. One could offer you a better interest rate while another one may require a smaller down payment. Choose the one that works best for you.
To get pre-approved, be prepared to give in a bunch of documents. This can include your income statements, your banking statements, tax documents, debt statements, and more. You will also need to go in and talk with your mortgage lender about your information and financial goals.
Your Pre-approval Letter
When you are pre-approved, your mortgage lender will hand you a piece of paper – your pre-approval letter! Keep good care of this document; it indicates that yes, you have in fact been pre-approved for a mortgage. It will state how much you are pre-approved for, your interest rate, and any other important terms that sellers will want to know.
Note: Your pre-approval is not the official mortgage application. That happens after the offer you put on a house is accepted by a seller. The point of the pre-approval is to show sellers that you have a solid financial backing from a mortgage lender.
Present your pre-approval letter during home negotiations to show you are serious about home buying. And that can give you more bargaining power.
How Long is a Pre-approval Good for?
All good things must come to an end, and that includes your pre-approval. In addition to the details about your potential loan, your pre-approval document will also tell you how long the pre-approval will last for. How long is a pre-approval good for? That depends. Although each mortgage lender will have its own specific expiry date, a pre-approval tends to be good anywhere between 90 days to 120 days. Take a look at your pre-approval letter to see how long is a pre-approval good for.
What happens once your pre-approval expires?
You need to get a new one. And that means going through the entire pre-approval process again – collecting your documents, meeting with your mortgage lender, discussing goals – the whole shebang. It also means that the terms of your pre-approval could change, perhaps for the better. Or perhaps not.
The reason for the expiry is that your financial circumstances can change, so a mortgage lender wants to make sure they are dealing with your most current details possible. When you do put an offer on a home, you want the best chance of your mortgage application being accepted. Also, interest rates can change, and your pre-approval letter will show that.
You can avoid this pain by getting your mortgage pre-approval only when you are ready to go home searching. Talk with the professionals at Shamrock Financial about the pre-approval process and what you can do to make it as easy as pie. We are here to help!