Mortgage Preapproval FAQs
Continue reading these frequently asked questions if you’re still curious about home loan preapproval.
Why should I get a mortgage preapproval?
Mortgage preapproval is beneficial for home buyers for a number of reasons. It helps buyers search for homes within their budget, making for a smoother and more efficient house hunt. It also makes an offer more enticing to a seller, and gets a bulk of the mortgage process done early on.
How long does preapproval last?
If you’re preapproved, you’ll receive an approval letter offer that lasts for 60 – 90 days, depending on the lender. After that, you’ll need to apply again with another credit pull and updated paperwork. If there are any major changes to your financial situation, your preapproval limit might also change.
You can look at a house without preapproval. But getting preapproved for a mortgage early in the home buying process is beneficial. This way, you can find out if there are any issues that could prevent you from getting financing.
What factors are considered for preapproval?
In addition to considering your credit score, lenders will want to verify your employment and income. They’ll also consider your debt-to-income ratio (DTI). This is a calculation of your total monthly debts divided by your monthly income. This ratio, expressed as a percentage, helps lenders make sure you have enough income to reasonably cover your debts.
The exact DTI needed for mortgage approval varies by loan type. But generally speaking, you’ll want your debt-to-income ratio to be 50% or lower.
Why should I get preapproved by more than one lender?
Applying to multiple lenders helps home buyers compare interest rates and choose the deal with the most favorable terms. Shopping around for a mortgage that best fits your finances can save you a lot of money over the life of the loan.
Does getting multiple preapprovals hurt your credit score?
Each time you apply for a loan preapproval or approval, a lender checks your credit with a “hard pull.” This typically lowers your score by a few points. However, FICO® states your credit score generally won’t be negatively affected if you make all your inquiries on a home loan within 30 days.
Can you get denied a mortgage after being preapproved?
Yes, it is possible for a buyer’s mortgage to be denied after preapproval. This could happen because of an issue with the appraisal or guideline changes made by the lender.
But in most cases, getting denied is due to the buyer’s financial standing being negatively impacted. Examples include a change of employment, a decrease in credit score or accrued debt. It’s important to not make any mistakes or drastic changes until after closing on your home.
Will I get approved for a mortgage with bad credit?
The credit score needed to buy a house depends on the type of mortgage you’re looking to get. For example, conventional loans usually require a credit score of 620, while FHA loans only require a score of 580. If your score is below the minimum, you may not get approved.
However, you can still get approved with bad credit. Your chances of getting approved for a mortgage can increase with a bigger down payment or a low DTI. Switching to an FHA loan or taking time to repair your credit before applying can also make homeownership possible.
How far in advance should I get approved?
You should get approved for a mortgage as soon as you’re ready to start searching for homes. More importantly, you should get a mortgage approval as soon as you’re financially ready to buy a house. Keep in mind that the better your financial situation is, the more likely you are to get approved.
