Getting preapproved for a mortgage before you start looking at houses will help you figure out how much you can borrow so you can put your focus on homes in your price range. When the time comes to make an offer, being preapproved can show the seller that you will most likely be able to get final mortgage approval.
How Long Does Preapproval Last?
When a lender preapproves a mortgage, the offer is valid for a specific amount of time (usually 30 to 90 days, but sometimes as long as 180 days). If you get preapproved and the offer is good for several months, you should have time to look at numerous houses and carefully weigh your options without feeling rushed.
A lender may agree to lock in the interest rate it quotes you. That means that even if market conditions cause interest rates to rise before you buy a house, the rate you were quoted will still be available to you until the preapproval letter expires.
If your preapproval expires before you’re ready to buy a house, you may be able to contact the lender and get it extended. The lender may require you to submit up-to-date financial documentation so it can find out if your circumstances have changed.
Getting Preapproved Early can Give You a Chance to Improve Your Finances
If your credit score is marginal or you have a high debt-to-income ratio, you may be disappointed when you get preapproved for a mortgage and find out that you don’t qualify for enough to buy a house in the price range you want. Learning that several months before you plan to buy a house can be helpful, however.
It can give you an opportunity to work on paying down debt and raising your credit score. Then, if you apply for preapproval again, you may qualify for a large enough loan to buy your dream home. If, on the other hand, you don’t seek mortgage preapproval until right before you want to buy a house, and then you find out that you can’t get the loan you’re hoping for, you may have to buy a less expensive home or put off a purchase for several months or longer.
You may have to make a large down payment to qualify for a mortgage with a competitive interest rate. If you find that out well before you intend to buy a house, you will have time to work on building your savings or to seek another source of funds, such as a gift from a family member.
When to Get Preapproved
You can get preapproved right before you begin house hunting, or you can seek preapproval several months before you plan to buy a new home. If your finances are iffy, getting preapproved early can give you time to address problems so you can get a mortgage to buy the house you want.