How Long Does a Pre-Approval Take? A Case Study
If you’re ready to make a move and start the search for a new home, you may want to familiarize yourself with the pre-approval process. Unless you’re planning on paying all cash for your new home, a pre-approval is essential. How long does it take to get a pre-approval letter? How long are pre-approvals good for? And how does it work? With an understanding of pre-qualification and pre-approval letters, you’re one step closer to your homeownership goal.
Having a pre-approval on hand will guide you towards the right homes you can afford and provides you with a strong offer to stand out among other buyers. It also allows you to work with a real estate agent, as some may not work with buyers who do not have one. And while getting pre-approved, you can take care of any financial issues that may arise early in the home buying process.
Your questions about pre-approvals are answered here so you can speed up the approval process.
How Long Does It Take to Get Pre-Approved for a Mortgage?
Getting pre-approved for a mortgage typically takes around 10 days. Home financing companies often need some time to look into the documents. It includes bank statements, assets, pay stubs, and tax returns that you provide them when applying. Of course, this timing may vary based on the home financing company you choose to partner with. And whether you have all your finances in order and have it ready for the company to review. Sometimes there are issues in the credit check, or if you’re self-employed, additional verification may be needed. These factors may also contribute to the time it takes.
Being aware of how long the process of being pre-approved takes is important as you start your search for a new home. If you are looking to purchase within a set time frame, factor in the time it’ll take for the pre-approval. Sellers may require this information along with your offer. Some real estate agents also may require seeing a pre-approval before they will show houses to you.
It may be a good idea to get pre-approved, even if you’re just in the beginning stages of wanting to purchase a home. Any issues regarding your credit that you may have been unaware of could come up during this process. Having these situations brought to your attention early on gives you an opportunity to fix it in time for you to purchase your new home.
What Does Pre-Approval Mean?
Being pre-approved means you received a letter from a home financing company, which shows how much money they are willing to provide you. This is based on the financial information you provide to the home financer. Additionally, photo IDs and employment information are some other things you need to be pre-approved for a mortgage. They will look into this information, conduct a hard credit check, and issue you a pre-approval letter.
Note that this isn’t a guarantee that they will provide the money. It is handy to have as it boosts a seller’s confidence that you are able to finance the home. It also shows you can be taken seriously, considering you went through the process to get pre-approved. And during the busy season, including this letter may contribute to a stronger offer to differentiate yourself among other potential buyers.
How Mortgage Pre-Approval Works
The process for getting a pre-qualification or pre-approval letter begins with putting your finances in order. First, decide the amount you’re willing and able to put for a down payment. This will also determine how much your monthly payment will be. You’ll want to have the down payment amount in your bank accounts. If you need to transfer money from different accounts, or are receiving monetary gifts, these transactions will need to be verified by your home financing company.
Next, you’ll need to find a home financing company to partner with. Keep your options open and talk to several financial partners. Then decide which you feel most comfortable discussing your finances with. Gather all the documentation that the company requires in order to provide you with a pre-approval letter. And finally, fill out a full application and allow the company to do a hard credit check. The company will review the information and provide you with the letter.
It doesn’t just end there though. Try to keep your finances the same throughout the pre-approval and home buying process. You do not want any major changes to occur that may affect the amount that you are pre-approved for. If you have questions along the way, stay in touch with your home financing partner.
How Long Are Pre-Approval Good For?
Pre-approvals are typically good for 60 to 90 days. Check your pre-approval letter for an expiration date, which is there because your finances may change in that time period. Contact your home financing company for an updated one if needed.
Why Is It Important to Get Pre-Approved?
Getting pre-approved is important as it points you in the direction you need to go in your home buying search. A pre-approval will show you how much you can spend on a home. It guides you to the appropriate homes to view. You do not want to waste your time looking at homes that you will not be able to get financing for. And similarly, it allows you to not rule out certain homes that you may have thought were out of your price range.
Additionally, getting pre-approved shows a seller that you are serious about purchasing their home and you are able to get the appropriate financing needed. And it helps you, the home buyer, identify any financial issues you may have before purchasing the home.
Getting Pre-Approved Quickly: A Case Study
Sometimes, the pre-approval process can be done quickly and even faster than 10 days. Take for example a home financing client who had made multiple offers on multiple properties as he was searching for a new home. Each was rejected, but finally, he was able to have one offer accepted. However, his pre-approval was just about to expire.
Some pre-approval letters are valid for up to 120 days. And with multiple rejected offers, clients can get discouraged and delay the home buying process. This client was persistent despite the rejected offers and having an expired pre-approval letter would’ve been an additional letdown. The pre-approval was needed on a Friday. While working with Guidance Residential, he was pre-approved within 24 hours and was able to put in the offer successfully. His file is currently in the process of being underwritten and is expected to close per his contract.
Thanks to a dedicated Account Executive who was there each step of the way, including providing a pre-approval as quickly as possible, this client had a smooth home buying process.
Start your home buying journey. Pre-qualify online today in fewer than 10 minutes with Guidance Residential.