How Early Is Too Early To Get Pre-Approved?
It’s never too early to get pre-approved.
You may hear that pre-approvals expire, so don’t get one until you’re 60-90 days from buying a house.
This is terrible advice.
You may be unaware of a major issue in your scenario that lowers your pre-approved amount or makes you ineligible for a mortgage. These issues can take much longer than 90 days to resolve.
Then you spend an extra year fixing the problem, home prices rising all the while.
A pre-approval has very little impact on your credit score, and it's a small price to pay for knowing where you stand. Very few people can get pre-approved "too early."
4 Reasons It Makes Sense to Get Pre-Approved Early
Here’s why it makes sense to get a mortgage pre-approval earlier than you think you need to.
1. Discover Major Qualification Issues
The everyday first-time buyer can’t and shouldn’t try to be a mortgage expert.
It’s often impossible to know that one element of your profile can disqualify you from mortgage approval.
For example, your employer changed your position from W-2 to 1099 recently. You’re now considered self-employed and must wait at least a year to buy a home.
The pre-approval process would alert you to find another W-2 position if you want to buy earlier.
Or, you find out that you have a 610 credit score instead of the 700 shown by a free credit score site. Mortgage lenders use a different scoring model than credit score sites.
There are hundreds of “gotchas” across the mortgage landscape. The only way to uncover them all is by contacting a loan officer and requesting a full pre-approval.
2. Get a Personalized Review
Mortgage rules are not always black and white. There are gray areas that require human judgment. For example, did that extended vacation count as a job gap?
A loan officer can weigh in, but he or she will often package up your file and send it to an underwriter. The underwriter will decide on the question at hand.
No matter the decision, you know where you stand. You can work on deficiencies without being on a timeline.
3. Get a Realistic Idea of Your Price Range
It happens a lot: a first-time buyer calculates the price they can afford. For example, they believe they can buy a $400,000 house based on the monthly payment.
When they’re ready to buy, they find out they can only qualify for $300,000. Maybe interest rates are higher than they thought or they didn’t factor in existing debt payments or property taxes.
Now they have to lower their expectations, which is mentally tough to do.
You can save yourself massive disappointment (and a lot of time and energy) by knowing the home price range you qualify for before getting too deep in your search.
4. Be Ready If You Want to Buy Earlier
Many people want to buy in a year or two because they think they can’t qualify yet.
But applicants often discover they qualify now and decide to move forward.
Others end up needing to buy earlier. Maybe they are expecting a baby, adopted a dog that needs a yard, or happened upon the perfect house for them.
Life is unpredictable. It’s better to know your homebuying ability than to start from scratch when you need to move quickly.
How Long Does It Take to Get Pre-Approved?
For some applicants, a pre-approval can take just a few hours. Others may require months if there are credit, income, or asset issues to deal with.
But you don’t know which applicant you are until you request your pre-approval from a lender.
Can Anything “Bad” Happen To Me by Getting Pre-Approved Early?
There are nearly no adverse effects from getting pre-approved too early.
The only slight risk is that your credit score drops – less than five points, says MyFico. Your credit score could drop if your lender pulls a new report every 90 days, so ask your lender not to pull credit again until you've found a house.
Because you’re not obligated to buy a home within a certain amount of time, getting approved early is not a commitment to buy or to use a particular lender.
Does it Bother my Lender to Get Pre-Approved Too Early?
Most lenders are happy to pre-approve applicants who do not plan to buy right away.
This is a golden opportunity for the loan officer to make a good impression so you come back and use them as your lender when you’re ready.
Besides a bit of paperwork, it doesn’t cost the lender much time or money to keep your file active in the system. They may reach out every so often to check status of your home search.
When do Pre-Approvals Expire?
Your pre-approval letter will state when it expires. This is typically 90 days. Your credit report expires after 120 days and the lender wants 30 days to close the loan before it must pull a new report.
It’s okay if your pre-approval expires, though. You can likely get a new one quickly unless one of the following has occurred:
Interest rates have risen significantly
Your income or employment situation has changed
You have less in savings
You took on new debt
Your credit takes a hit
Another financial change occurs
Be Ready for the Home You Love
Sometimes the perfect house comes on the market but is snatched up in less than 24 hours.
You often can’t get pre-approved in time to make an offer. Plus, real estate agents won’t show you a home in person without a pre-approval letter.
Prepare early, and you won’t miss out on the perfect house.
