How Long is a Mortgage Pre-Approval Good For?
This is a pretty simple question, but as it is with most things real estate related, the answer is a little bit complicated. On many pre-approvals I've seen, lenders note that it's good for 60 days. Others say 30 days. Others say 90, and some don't even list an expiration. So what's a borrower to think?
First I'll give the "simple" answer to the question, and if you'd like to see the WHY behind the discrepencies between lenders, you can continue reading.
How long is a mortgage pre-approval good for? The truth is, it's good for the 30 seconds it was printed, and really beyond that, it's dependent on a lot of variables. Under normal circumstances, things don't change drastically enough to negate a pre-approval that quickly, but it has happened before. Programs disappear overnight sometimes. Pricing on a specific product or across the entire market can skyrocket almost overnight as well, negating a pre-approval for someone with a debt/income ratio near program maximums. Finally, a borrowers situation can change overnight - jobs are lost and/or changed, incomes fluctuate, and sometimes a credit profile changes enough to nullify a pre-approval.
Why do lenders say 30, 60, or 90 days?
Well, technically speaking, a credit report is valid in mortgage lending for 90 days, so provided no loan programs change, rates are stable, and nothing about the borrower changes, someone should have 90 days to officially apply for a loan from the day a pre-approval is done.
Some lenders say 60 days because they factor in 30 days to get through the mortgage loan process - so you've got 60 days to find a home with your pre-approval, and another 30 days to get to settlement before you hit the magic number of 90 days before a new credit report is pulled.
Some lenders say 30 days because...well...marketing? If you're in the pre-approval process, lenders are scared you're going to shop them, and potentially end up working with someone else. If you have to check in every 30 days it gives them an opportunity to keep in touch, build rapport, and increase the chances that you'll close with them when you do find a home.
What can you do to make sure your pre-approval is of value?
There's not much you can do when it comes to interest rates or programs coming & going, but there are things you can do to make sure your pre-approval means you'll be getting the keys to a new home (as soon as you find one!). For one, keep your credit in the same (or better) shape as when you applied. That means not opening or closing accounts, not adding to credit card balances, and not buying new things with credit. It also means not changing jobs (mid-homebuying process is a terrible time to decide on immediate, full time self-employment), and not moving around assets without checking with your loan officer first.
Also, be sure you're getting a full pre-approval, and not just a quick, paperwork-free pre-qualification. If your lender gives you a pre-qualification after a 5 minute phone conversation without requesting any additional information or documentation, it's time to find a new lender.
Here is the minimum paperwork you should have available when getting pre-approved:
- Recent income documents (W-2's for the past year, along with a recent paystub reflecting YTD (year to date) income, or previous 2 years tax returns (yes, all schedules) if you're self-employed, proof of Social Security (award letter), asset depletion, or pension income if you're retired.
- Asset documents (all pages for each account) to show funds being used for your purchase and any required reserves
- Most recent 2 years tax returns if you work on bonus or commission income, OR if you own investment properties.
Some lenders may "save you time" by not requiring any documentation up front, or promising a quick pre-qualification over the phone, but they will not be saving you headache when you run into problems down the line.
So how long is a mortgage pre-approval good for? If rates, programs, and your financials all stay the same, a pre-approval is good until one of those factors changes, but after 90 days, a new credit report is necessary.