Home Buying in Philadelphia>Question Details

Ronnie, Home Buyer in Philadelphia, PA

How long after you get pre-approved for a loan do you have to find and purchase a house?

Asked by Ronnie, Philadelphia, PA Fri Sep 21, 2007

I'm just looking right now, but I'm told the 1st step is to get pre-approved. But it may be months, maybe even 1-2 years before I actually decide to move into a home, since I'm saving my money right now. Is there a window of time between approvement and actually using the loan where it can become void?

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Ronnie,

Pre-approval can be void tomorrow. It's not an entitlement. It's a "snap shot" number that doesn't change if you and the market don't change - what are the odds?

Pre-approval is a valuable benefit to you and to the seller of the property you want to put an offer in on. It doesn't have a "life", so to speak.

Pre-approval gives you a value range for the purchase of a home - based on today's circumstances with your credit / income / current debt and employment situation - it's what one or a number of lenders would be comfortable lending to you for the purchase of a home based on how much you're going to put down and current interest rates.

Lots of things change that number. Some of them you have some control over (like your employment, your current debt obligations, your payment history and subsequently your credit score) and some of them are totally beyond your control, like interest rates and home values. If you lost your job, bought a new car, got into a car accident, won the lottery, expanded or contracted your family size - any number of unpredictable things, it could change your pre-approval situation immediately.

If you're not going to buy a home for over a year, you'll want to get pre-approved again when you're approximately 3 - 6 mos. away from actually making the decision.

It takes approx. 30-45 days to process a loan. How long it takes you to find a house you like or "be ready" is entirely up to you.

Don't shop a lot of lenders for rates though until you really think you're ready for the commitment to buy. Too many inquiries for credit on your credit report can sometimes lower your score - even a few points could cost you in interest premiums later.

Here's another helpful website on the other costs and process to close! ttp://www.knowyourclosing.com/Index.html

Good luck with your home purchase process and enjoy the experience. There are lots of great advisors in this forum that are here to help. Keep your questions coming!
1 vote Thank Flag Link Fri Sep 21, 2007
Hi Ronnie:

It will vary from lender to lender, but a pre.approval is generally valid for 30-90 days; in some cases, up to 6 months.

A pre.approval letter is typically dated with the date of issuance and will state for how long the pre.approval remains in force.

Should you submit a pre.approval letter with an offer (which can give the seller peace of mind that you are actually qualified to enter into the financial obligation you are proposing), be mindful of the date of issuance. Should the seller's agent feel your pre.approval letter is too old, she may likely request an updated letter, which will mean a second review of your credit, verification of employment, verification of deposits, etc.

To avoid having to undergo the process twice in a row and potentially lower your credit score (multiple inquiries into your score can lower it), you might apply for your pre.approval 1-2 months prior to the commencement of your house-hunting. Generally, if you are prepared with all the necessary documentation a lender requires, you can be pre.approved within 24 hours max.

In the meantime, since you do not plan to actually begin your search for at least another year, unless you foresee a huge change in your debt/ income ratio by the time you are ready to buy, there is no reason you could not get pre.approved now just to have an idea of what and where your budget will allow for you purchase when the time does come. By then, enough time will have passed so that a new pre.approval process will not impact your credit score.
0 votes Thank Flag Link Fri Sep 21, 2007
Patti Pereyra, Real Estate Pro in Chicago, IL
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There seems to be a lot of confusion about pre-approval, most likely because of confusion between pre-qualification and pre-approval. In your situation you want to be pre-qualified. Pre-qualification is on face value and neither data you you will give to the lender/mortgae broker will be verified, nor your credit report will be pulled. Once you you are ready to make an offer - you will need to get pre-approved. Lenders will verify your data at that time (W2s, credit report, etc. Check Mortgage Professor's definition of both terms: http://www.mtgprofessor.com/A%20-%20Qualifying/qualification…
Web Reference: http://www.cimpler.com
0 votes Thank Flag Link Fri Sep 21, 2007
ARTUR URBANS…, Real Estate Pro in Burlingame, CA
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Most pre-approval letters have an expiration date on them. Check yours and/or check with the issuing entity and you will know how long the preapproval is good for.
Web Reference: http://www.dianeglander.com
0 votes Thank Flag Link Fri Sep 21, 2007
The terms that you are initially given may not be the terms you ultimately receive because after contract you'll need to go through an underwriting process that requires full documentation, verification, etc. so that you can secure a loan commitment from the lender. Furthermore, rates fluctuate on a daily, if not intraday, basis.

Getting pre-approved now may provide you valuable insight into what you can afford when it is time. This information may influence your choice of location, housing style and savings program.
Web Reference: http://PhillyandBeyond.com
0 votes Thank Flag Link Fri Sep 21, 2007
Hello Ronnie. I would agree that you should get pre-approved even if your search may take several years. Although I am not sure why it would take so long, I'll just operate on the assumption that you are not quite ready to purchase. Part of the reason why you want to get pre-approved is to determine your price range. Since pre-approval will also require a credit report, you'll know where you stand. The better your credit score is the better the interest rate will be. If your credit score turns out to be lower than what you need to get the better rate, you'll have time to work on improving your score.

While it is true that a pre-approval letter is not a guarantee that you'll actually get the loan for which you have been pre-approved, I can assure you that seller's will take you a lot more seriously when your offer is accompanied by a current pre-approval letter. I would therefore suggest that you get in contact with a loan agent and explain your situation. The agent can get you pre-approved and review the situation from time to time and update the letter when needed. This way, you'll be ready to go when you find the right house, whether it's today, tomorrow or a year from now.
Web Reference: http://www.go2kw.com
0 votes Thank Flag Link Fri Sep 21, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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