Everything You Need to Know About Mortgage Preapprovals
Everything you need to know about mortgage preapprovals — how they work, what lenders check, and why they boost your buying power.
Total Quality Lending is on a mission to educate the next generation of home buyers by providing transparent guides that help people make smarter investment decisions. Here is a list of FAQs and more to tell you everything you need to know about mortgage preapprovals.
Get Preapproved for a mortgage
Determine your buying power with an online preapproval
Most home-buyers start casually shopping months before they are ready to buy a home. They spend countless hours, days and, nights searching for their dream home on popular real estate sites. This process can be exciting at first and even motivating. With every new listing the excitement peaks and transitions to anxiety once they find the home they believe to be "the one".
The anxiety quickly shifts to regret when they work up the courage to contact the listing agent days later, only to find out an offer has already been accepted and the home is no longer on the market.
This is a common disappointing story that can easily be avoided with one simple step.
Get a pre-approval letter!
The majority of lenders recommend that even casual prospecting home shoppers improve their chances of finding their dream homes by equipping themselves with a preapproval letter.
Read below for answers to the most common frequently asked questions about mortgage preapprovals:
Preapproval’s are completed by lenders when they run a soft credit analysis with the credit bureaus. Through the preapproval process lenders can provide prospecting home buyers with an estimated interest rate offer and a maximum principal amount, which allows borrowers to begin house shopping strategically and competitively based on their pre-approved amount.
Both sellers and buyer’s agents treat buyers with preapproval letters seriously compared to those who are shopping without a current preapproval letter. Shopping with a preapproval letter can be the difference between getting an offer accepted or rejected, especially in a buyers market.
How long does a mortgage preapproval last?
The time frame varies by lender, but commonly a mortgage preapproval is good for 90 days. The preapproval letter may have an expiration date on it. If you’re still shopping for homes after that point, you can ask the lender to renew the preapproval. You may need to provide updated information, and the lender may check your credit again.
When is the best time to get preapproved for a mortgage?
The best time to get preapproved is just before you start shopping for homes. By verifying how much you’re qualified to borrow, preapproval helps you decide what you can afford. (However, you may not want to spend as much on a home as the amount you can borrow.)A mortgage preapproval letter also puts you a step ahead of other prospective buyers who aren’t yet preapproved.
Will getting preapproved by more than one lender hurt my credit score?
A lender’s request to review your credit report counts as a “hard inquiry.” Hard inquiries can lower your credit score if they’re a result of trying to open a bunch of new credit lines in a short time. But multiple hard inquiries as a result of rate shopping for a home loan generally don’t hurt your credit score.
FICO, one of the largest credit scoring companies, recommends confining rate shopping to a relatively narrow period, such as 30 days.
