A mortgage preapproval is the first official step some buyers take in the home-buying process. After reviewing your financials and credit score, a lender commits to providing a specific interest rate and up to a certain loan amount for you to buy a home.
Mortgage preapprovals are usually good for up to three months. If you’re actively searching for a house to purchase, a mortgage preapproval can show the seller you’re serious about buying and help get your offer accepted. Plus, it can make the mortgage application process easier.
What is a mortgage preapproval?
Home shoppers can find out how much mortgage they qualify for, and at what interest rate, with a mortgage preapproval. The lender takes your financial information—such as your income, debts, and credit score—to determine the maximum loan size for which you qualify. A mortgage preapproval can also provide a monthly payment estimate, which can help when budgeting for a mortgage.
A mortgage preapproval letter is an essential part of house-hunting. It will show real estate agents and sellers that you’re ready and qualified to buy the home you’re interested in.
How long does it take to be preapproved for a mortgage?
The timeframe it takes to get preapproved for a mortgage can vary. If the lender accepts mortgage prequalification applications online, and you have the necessary financial information ready, it can take less than an hour to fill out the application. You could be preapproved the same day, in some cases. If the lender has to ask for more documentation, the process can take longer.
What do I need to provide for a mortgage preapproval?
A mortgage preapproval is the first step to getting a mortgage loan. Lenders have to review your financial information to determine if you qualify. When applying for a mortgage preapproval, be prepared to provide:
- Bank statements
- Driver’s license
- Social Security number
- Last six months of pay stubs
- Last two years of W2s and tax returns
- Proof of your down payment amount
Besides taking into consideration your income and debts, lenders also check your credit history. Most lenders want to see a credit score of at least 620.
You can request a free credit report at AnnualCreditReport.com.Reviewing your credit report from each of the three credit bureaus—Equifax, Experian and TransUnion—will ensure there are no errors on your report that could have a negative impact on your credit score.
If you find an error on your credit report, you should dispute it with the appropriate bureau to get it corrected before submitting your preapproval application. Applying for preapproval requires a hard inquiry on your credit report, whereas pulling your free reports doesn’t affect your score.
By taking this step, you can ensure your credit information is correct or take the necessary action to correct it, which can improve your score. The better your credit score, the lower your mortgage interest rate and the more loan options you have for funding your home purchase.
How long is a mortgage preapproval good for?
How long a mortgage preapproval applies depends on the lender. Most lenders will provide a mortgage preapproval letter that expires within 60 to 90 days. Not only can interest rates change during the preapproval window, but so can your financial situation. Either can affect your maximum borrowing potential, which is why lenders don’t want to take on the risk beyond 90 days.
If you don’t find a home within the preapproval timeframe, your letter will expire and you’ll have to be reapproved. You can choose to stay with the same lender or go to a new lender for reapproval. If you stay with the same lender, it may require updated bank statements or income verification and will likely do a credit report refresh. If you choose a new lender, you’ll have to submit a new application and provide the necessary documentation for review and approval.
If there are no financial changes, the lender should provide a new mortgage preapproval letter with a fresh expiration date. If there are changes, it could affect your interest rate and loan amount.
Positive changes could increase how much you can borrow or reduce your interest rate. Negative changes, such as a lower credit score or debt increase, could lower your maximum loan amount or increase your interest rate. Some changes might even make you ineligible, which means the lender won’t provide a new mortgage preapproval letter.
It’s not just about you, either. External events, such as the state of the economy or new regulations, can also affect the size and cost of the mortgage being offered from one month to the next.
When should you apply for mortgage preapproval?
If you are serious about buying a house soon and are actively house-hunting, it’s a good time to apply for a mortgage preapproval. The preapproval is the first step to securing a mortgage loan and can help you understand how much you can afford and which price range to shop in. It will also give you an idea of what your mortgage payment will be, so you can make sure it fits your budget.
Having a realistic budget and tracking your credit score during the home-buying process can ensure you get the best terms and interest rate. There are also plenty of tools out there to guide you, including the Rocket Money app, which can help you understand and track your credit score, create a budget that automatically tracks your spending, and get the best price on bills you’re already paying. When buying a house, solid financials are essential.
Since a mortgage preapproval letter is only good for a few months, it’s best to wait until you’re actively looking and ready to buy before proceeding. Getting preapproved too soon may cause the preapproval to expire before you find the right home. If this happens, you’ll have to be reapproved, which could negatively impact your credit score.
What’s the difference between preapproval and prequalification?
If a lender provides a mortgage preapproval after reviewing your financials, it means it is committing to providing a loan when you find a home you want to buy. A mortgage prequalification is not a lender commitment; it’s just an estimate of how much a prospective home-buyer can qualify to borrow.
A prequalification rarely requires as much financial information as a preapproval. The lender will review your credit history and income to determine your loan capacity, but it’s not a guarantee it will provide a loan to purchase a home. What prequalification can do is help you decide whether you have the financial resources to go house-hunting and narrow your search to properties lenders are likely to believe you can afford. Think of a prequalification as the step before a preapproval.
When you’re seriously house-hunting, nail down that preapproval letter. Having it in hand when you decide to make an offer on a property will demonstrate to the seller that you are likely to receive financing. This could give you an edge in having your bid accepted if there are multiple offers. And it can make the mortgage process easier when you’re ready to go to contract.
Frequently asked questions (FAQs)
Do preapprovals hurt your credit score?
Mortgage preapprovals constitute a hard inquiry and leave a mark on your credit score Luckily, inquiries don’t have a big impact on your credit score. What’s more, as long as all the mortgage inquiries are within a 14-day window, you should only see one hard inquiry on your credit report. A hard inquiry can stay on your credit report for up to two years.
What happens if I don't use my preapproval?
If you don’t use your preapproval before it expires, you’ll have to requalify, which means you might have to resubmit proof of income and debt to be reapproved. After the bank completes the review, it will provide a new preapproval letter, which will have a new expiration date.
Do you need a down payment to get preapproved?
Yes. Showing proof of the size of your down payment is part of the prequalification process. The amount you can put down on your mortgage can affect the type of loan for which you qualify and the total size of the loan.
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Most mortgage preapproval letters last between 60 – 90 days. Your mortgage preapproval will list how much you're approved to borrow, your interest rate and other terms and conditions. Typically, borrowers should wait until they're ready to actively search for a home before they get preapproved.What happens if I don't use my pre-approval? ›
In addition, because pre-approval includes submitting a loan application and securing financing, it can accelerate the closing process. However, don't worry if you don't use your pre-approval in time. Your house-hunting doesn't have an expiration date just because your pre-approval does.How far in advance should I get preapproved for a house? ›
The best time to get pre-approved for a mortgage is at least one year before you decide to purchase. As a home buyer, pre-approvals are for your benefit, so it's never too early to get one. Getting pre-approved early is an advantage because one-third of mortgage applications contain an error.Can I extend a pre-approval? ›
Preapprovals typically can't be extended, but they can be renewed. The difference is that your financial information will need to be re-verified; you can't just extend your preapproval based on previously submitted information. Many lenders will want to see the latest versions of your preapproval documents.Is preapproval good for 90 days? ›
Does a Preapproval Letter Expire? Once you have your preapproval letter, you may be wondering how long it lasts. Your income, credit history, interest rate — think about all the different ways your finances can change after you get your letter. For this reason, a mortgage preapproval typically lasts for 60 to 90 days.What pre-approval won't hurt your credit score? ›
Fortunately, in most cases, a preapproval has no direct impact on your credit since the process typically involves a soft inquiry of your credit. If you respond to a preapproved offer from a credit card issuer and submit an application, the card issuer will do a more thorough review of your credit.Does a pre-approval hurt your credit? ›
A mortgage preapproval can have a hard inquiry on your credit score if you end up applying for the credit. Although a preapproval may affect your credit score, it plays an important step in the home buying process and is recommended to have. The good news is that this ding on your credit score is only temporary.What percent of pre-approved mortgages get denied? ›
But you might not get a mortgage at all, if you fall into some of these traps: According to a NerdWallet report that looked at mortgage application data, 8% of mortgage applications were denied, and there were 58,000 more denials in 2020 than 2019 (though, to be fair, there were also more mortgage applications).What credit score is good for buying a house? ›
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.Should you shop around for mortgage pre approval? ›
In order to get the best rates and fees, it is important to shop around before you select a lender for your preapproval. It's in your best interest to investigate different options to determine who has the lowest rates and fees — and maybe even apply in more than one place.
You can make an offer on a house that goes beyond what your preapproval letter will cover, but you will be expected to make up the difference out of pocket. If you can't increase the size of your down payment, then you can't make an offer that goes beyond your preapproval.Does getting multiple mortgage pre approvals hurt your credit? ›
Credit reporting companies recognize that many people shop around for a mortgage, so even if a lender uses a hard credit check for your pre-approval, there won't be any further impact to your credit score if you complete multiple mortgage pre-approvals within 45 days.Should you talk to multiple lenders? ›
Contact several different lenders — it's helpful to get to know a few different loan officers. Different lenders also offer different kinds of loans. You want to explore your options in greater detail. Ask questions to help you get a better sense for what kind of loan might be the best choice for you.How hard does a pre-approval affect credit score? ›
Does getting a prescreened pre-approved offer hurt your credit? The short answer is: No. That's because a prescreened pre-approval involves a soft inquiry, which doesn't affect your credit scores. The prescreen soft inquiry is simply a way for lenders to determine if you may qualify for their credit card offer.Can I get denied after preapproval? ›
Getting pre-approved for a loan only means that you meet the lender's basic requirements at a specific moment in time. Circumstances can change, and it is possible to be denied for a mortgage after pre-approval.What happens when loan pre-approval expires? ›
Your home loan pre-approval will typically last 3-6 months, but if you haven't found the right property in this time or haven't successfully obtained an extension, your pre-approval will expire. Once it expires, you will be able to reapply for pre-approval with the same lender or another lender if you wish.What credit score is needed for pre-approval? ›
A credit score of at least 620 is recommended to qualify for a mortgage, and a higher one will qualify you for better rates. Generally, a credit score of 740 or above will enable you to qualify for the best mortgage rates.How many points does a mortgage pre-approval drop your credit score? ›
A mortgage pre-approval affects a home buyer's credit score. The pre-approval typically requires a hard credit inquiry, which decreases a buyer's credit score by five points or less.How accurate is credit pre-approval? ›
It's not a guarantee, but it's a good sign. Preapproval, on the other hand, is more official. If you've truly been preapproved for a credit card, you're almost certain to get it if you apply.What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
Clear-to-close buyers aren't usually denied after their loan is approved and they've signed the Closing Disclosure. But there are circumstances where a lender may decline an applicant at this stage. These rejections are usually caused by drastic changes to your financial situation.What would stop you from getting pre-approved for a mortgage? ›
Too High of a Debt to Income Ratio
Most lenders want a debt to income ratio of 36% for all of your debt, and 28% for your housing. If lenders look at how much you're making and you don't fit in those numbers, and you don't have enough for a mortgage payment, it's possible that you not be pre-approved for a mortgage.
- Move you one step closer to home ownership.
- Learn the home loan amount you may be able to afford.
- Provide confidence in your ability to obtain financing.
- Demonstrate your creditworthiness to the seller for the purchase amount.
- Reduce timelines and improves our ability to close your loan fast.
Some mortgage lenders are happy with a credit score of 580, but many prefer 620-660 or higher. If your credit score is lower, it is advisable to explore different lenders..What mortgage rate can I get with a 740 credit score? ›
|FICO Score||National average mortgage APR|
|660 to 679||6.806%|
|680 to 699||6.592%|
|700 to 759||6.415%|
|760 to 850||6.193%|
Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.Why do realtors ask for a pre-approval? ›
A preapproval helps you and agents narrow down your search to only properties that will fit into your price range. Initial expectations of how much you can afford may be different than reality (especially if you're buying your very first home).What do lenders look at right before closing? ›
Generally, they are looking for unusual deposits, sources of funds and reserves. I'll explain each of them below. Simply having money in your bank when you're at the closing table is not enough. The underwriter will review your bank statements, look for unusual deposits, and see how long the money has been in there.Can you get a preapproval letter without credit check? ›
With a prequalification, you won't have to provide as much information about your finances, and your lender won't pull your credit. Without your credit report, your lender can only give you rough estimates. This means the approval amount, loan program and interest rate might change as the lender gets more information.Does your pre-approval include down payment? ›
Pre-approval letters typically include the purchase price, loan program, interest rate, loan amount, down payment amount, expiration date, and property address.
You should let the agent know you have been pre-approved for a loan, although you do not have to show him/her your pre-approval letter. (By the way, being pre-approved is different from being pre-qualified, although many buyers confuse the two.How do I show more income for my mortgage? ›
- Interest or dividends from investments.
- Income from rental property.
- Alimony or child support.
- Money earned from a part-time job or side business (provided you've earned the income for at least the past two years)
- Income from a pension, retirement account or Social Security benefits.
|30-Year Fixed Rate||7.12%||7.13%|
|20-Year Fixed Rate||7.00%||7.02%|
|15-Year Fixed Rate||6.52%||6.55%|
|10-Year Fixed Rate||6.60%||6.63%|
The answer is yes. Lenders pull borrowers' credit at the beginning of the approval process, and then again just prior to closing.Why is my pre approval so low? ›
If you have an extensive monthly debt burden – i.e., a high DTI ratio – your preapproval amount will be lower. But if you can eliminate some of these debts – such as credit cards or personal loans – from your books, then a lender may be willing to increase your preapproval amount.How many loans is too many? ›
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.How long do you have to wait to get a mortgage after it is declined? ›
How soon can you apply for a mortgage after being declined? There's no fixed answer as it depends on how quickly you are able to correct some of the existing issues with your previous application. You could choose to reapply for another mortgage within a matter of weeks or months.How long should you wait between loans? ›
Many lenders require waiting at least 3 – 12 months (meaning you'll make 3 – 12 monthly payments toward the loan) before you may apply for another.Is it easy to get approved with Rocket Mortgage? ›
You only need to have a credit score of 580 in order to qualify for an FHA loan with Rocket Mortgage®. You may be able to get an FHA loan with a score as low as 500 points if you can bring a down payment of at least 10% to your closing meeting.Does Capital One auto pre-approval work? ›
On average, 9 out of 10 eligible pre-approved applicants are later approved for auto refinancing. This excludes customers who do not meet all eligibility criteria stated on their offers. Customer reviews are submitted by validated Capital One customers who refinance using Capital One.
- Late payments. Be sure that you remain current on any monthly bills. ...
- Applying for new lines of credit. ...
- Making large purchases. ...
- Paying off and closing credit cards. ...
- Co-signing loans for others. ...
- Changing jobs.
For many reasons a drop in your credit score can result in getting denied after pre-approval. First, an underwriter will see you as a higher risk if your credit score drops. Second, it's possible a lower credit score means a higher interest rate, which could make the monthly payments unaffordable.Do mortgage lenders look at credit card debt? ›
Lenders look at your credit card debt, too. They will use the total minimum required payments that you must make each month on your credit cards to determine your monthly credit card debt.What is the next step after pre-approval? ›
Key Takeaways. The mortgage process is complicated but can be broken into a number of steps: pre-approval, house shopping, mortgage application, loan processing, underwriting, and closing. It's a good idea to get pre-approval for a mortgage before you start looking for a property, so you know what you can afford.Do you have to use all of a pre-approved loan? ›
Your pre-approval offer letter typically specifies an amount of money that the bank is willing to loan you. You do not have to use the full amount by any means, and it is generally a good idea to spend less.How long is a preapproval letter valid for? ›
If you're preapproved, you'll receive a preapproval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.Can you cancel a pre-approval mortgage? ›
If you need to cancel a pending mortgage application, call your loan officer or broker immediately. In most cases, you have a three-day window to cancel the application and recover any paid fees. Tell the lender you want to cancel the pending application and provide a reason.Can you be turned down for a loan after pre-approval? ›
Even though you may have gone through the process of being qualified and approved, there is no guarantee of final approval. It is possible to be pre-approved and unsuccessfully obtain the financing to buy your new home. The most problematic time for this to happen is right before closing.What's the difference between preapproved and prequalified? ›
Prequalification tends to refer to less rigorous assessments, while a preapproval can require you to share more personal and financial information with a creditor. As a result, an offer based on a prequalification may be less accurate or certain than an offer based on a preapproval.How do I increase my pre approval amount? ›
- Find a co-signer or co-borrower.
- Improve your credit score.
- Boost your income.
- Pay off other debts.
- Make a larger down payment.
- Talk to another lender.
Get preapproval from two or three lenders and review their rates, fees and APRs. Just before or after starting home search. Commit to one lender by locking in an interest rate and giving the lender all it needs before a possible home contract.What percentage of the mortgage should the down payment be? ›
A 20% down payment is widely considered the ideal down payment amount for most loan types and lenders. If you can put 20% down on your home, you'll reap the following key benefits.Can I get a preapproval letter in one day? ›
Once you've submitted all of the documentation that your lender needs, it can take as little as one business day to be preapproved for a mortgage. But gathering the documents and information that the lender requires can take a few days, depending on your employment status, credit history, and how organized you are.Can I be denied after closing? ›
Can a mortgage be denied after the closing disclosure is issued? Yes. Many lenders use third-party “loan audit” companies to validate your income, debt and assets again before you sign closing papers. If they discover major changes to your credit, income or cash to close, your loan could be denied.Does pre-approval lock in interest rate? ›
Most mortgage lenders offer you the option to lock in your mortgage rate after your loan application has been pre-approved.Do you need to have down payment before pre-approval? ›
No down payment is usually required, but income limits apply. THINGS YOU SHOULD KNOWGetting a mortgage preapproval for a USDA loan requires a look at more than just your personal finances — the home you buy must be located in a rural area approved by the USDA.How accurate is a mortgage pre-approval? ›
Although the pre-approval varies from lender to lender, pre-approval is much more accurate than pre-qualification. The more rigorous questions the lender asks, the more accurate your pre-approval tends to be.