Buying a house is an exciting adventure, but it's also a complicated one. There are many forms to fill out, requirements to fulfill and rules to follow when negotiating and finalizing a home purchase. Your realtor or broker will help you and may get you preapproved for a mortgage fairly early in the process. This preapproval isn't valid forever. Most preapprovals are good for 90 days, but some lenders limit them to 45 or 60 days instead. Like the preapproval, your approval also expires. Once your mortgage is officially approved, you must close on the house and get the deal finalized before your actual mortgage approval expires, which typically occurs in 30 days.
Prequalification vs. Preapproval
When you start house shopping, your lender may issue you a prequalification or preapproval letter. These two statements are different. When prequalifying you for a mortgage, the lender will ask you how much money you make, the amount of debt you're carrying and what you think your credit score is. Based on this information, lenders determine whether or not they believe you'll get approved for a mortgage later.
Getting preapproved is a bit more complex. During the preapproval process, a lender will still ask you about your debt, income and credit score. This time, however, the lender will ask you to provide pay stubs, W-2s, tax returns and other supporting documents to prove your claims. The lender will also pull your credit report and check your FICO score. Neither a prequalification nor a preapproval is a guarantee that the lender will approve your mortgage when you apply, but both help you determine your chances.
How It Helps
A mortgage preapproval helps you in two ways. The first is that it tells you your budget. There's no point in looking at houses listed for $500,000 when you can only get a mortgage for $250,000. A preapproval helps you figure out how much house you can really afford and narrows the field when you're house hunting.
A preapproval also helps when you're ready to make an offer on a home. Sellers will take you and your offer much more seriously if you're preapproved. A preapproval tells the seller that you're serious about buying and that you have the means to realistically do so. Anyone can look at a house and make an offer to buy, but you're wasting the seller's time if you can't actually get the money you need to purchase the home. Preapproval gives the seller reason to believe that you are both serious about and capable of buying a house.
Why it Expires
Finding the right house is a time-consuming process, and your circumstances can change during that time. The longer your preapproval or approval lasts, the more likely you are to lose your job, fall ill or experience some other change in circumstances that would make paying your mortgage more difficult. As a result, most mortgage preapprovals and approvals last no more than 90 days. Some expire more quickly. If your preapproval expires before you find a home, simply ask your lender to preapprove you again. This may require you to provide more paperwork to prove your circumstances haven't changed. You'll also need to provide documentation again when it's time to actually apply for the mortgage.
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- Realtor.com: What If Your Mortgage Commitment Letter Expires Before Your Closing Date?
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