If you’re an aspiring homeowner, you may wonder, How much house can I afford? Although it’s just an estimate, getting a preapproval letter can be one way to answer this question. The mortgage preapproval timeline may only take about one to three days, and it’s an important step in the homebuying process.
“When shopping for a new home, getting preapproved for a home loan should be your first step,” says Sheila Harris, a mortgage loan originator at Silverton Mortgage in Columbia, South Carolina. “The process will allow you to understand how much home you can afford before you fall in love with something that may be out of reach.”
Still curious? We created this guide to show you when to get preapproved for a mortgage, and why it’s important.
When Should You Get Preapproved for a Mortgage?
It’s recommended to seek preapproval two to three months before you plan to purchase a home.
Getting preapproved earlier than this is not always to your advantage. Preapproval letters typically expire after 30 to 60 days, but some will expire after 90 days. Plus, longer gaps leave more room for your financial status to change.
Talk with your lender to find out its policy on how long your preapproval is good for.
Why Do You Need To Be Preapproved for a Mortgage?
Getting preapproved can inform your homebuying budget and help you decide what kind of house you can afford. When it comes time to compare mortgage offers, you’ll have baseline numbers to tell you what’s within your range. In addition, sellers appreciate a buyer with a preapproval letter in hand.
“The letter implies that you are serious about the offer and are prepared to close, which may give you more negotiating power compared to house hunters who aren’t as far along in the process,” Harris says.
What happens if you don’t get preapproved?
Without a preapproval letter, you may find that real estate agents will be less likely to work with you and sellers won’t take you seriously. Sellers typically prefer buyers with preapproval letters.
It also could take longer to close. This is because when you get preapproved, you’ve already submitted many of the necessary documents for a mortgage, and any potential problems likely will be corrected.
However, if you don’t get preapproved, you will avoid a hard inquiry on your credit. Hard inquiries are considered a negative mark, and will temporarily lower your credit score.
What Happens After I’m Preapproved?
First off, nicely done! On to the next steps of your homebuying journey:
- Find a real estate agent. In fact, find multiple agents and interview them to see who is right for you. Note that some agents prefer buyers who are preapproved.
- Shop for homes. Your new real estate agent can help you sort through your wants vs. needs vs. must-haves in a home. A preapproval letter also will show you how much house you can afford.
- Make an offer. Depending on how many contingencies you’re including in your offer, you may decide to offer more or less than the list price.
- Sign the purchase and sale agreement. This document is signed after both the buyer and the seller agree to the details of the sale and the seller accepts your offer. It finalizes all the terms of the sale.
- Get the mortgage underwritten. During this process, the lender will verify your financial information and decide whether to finalize your loan. The lender also will offer you terms and rates based on how much risk you pose as a borrower.
- Close on the home. This final step seals the deal and makes you the owner of your new home. Now all you have to do is decide where all the furniture goes!
FAQ
Here are answers to some frequently asked questions about when and why you should get preapproved.
