A pre-approval letter is a document from a mortgage lender showing they have made a preliminary review of your finances and will be willing to loan you up to a specified amount of money.
Pre-approval, which is sometimes called pre-qualification, isn’t a guarantee that you’ll get the loan. However, it does mean a lender has initially reviewed your finances and credit and has determined you may be eligible for a home loan. Therefore, a pre-approval letter can help you make offers on a home right away.
Pre-approval is the first step towards getting approved by a mortgage lender for a home loan. To get pre-approved, you complete a pre-approval mortgage application, and the lender checks your financial background and credit. The lender may then pre-approve you for a loan up to a certain amount at an estimated interest rate and issue you a pre-approval letter.
What does a pre-approval letter mean?
The pre-approval letter is what makes you a preliminary contender when bidding on homes for sale. It shows real estate agents and sellers that you’re working with a lender, that you’re pre-approved for a mortgage, and that you are able to make a legitimate initial offer on the home.
How long are mortgage pre-approvals good for?
Pre-approval letters are good for a limited period of time, typically 60-90 days. They aren’t set in stone though, so if there are significant changes to your credit history, employment, or current interest rates, your lender’s offer may change once you officially apply for a home loan.
What are the benefits of mortgage pre-approval?
Getting pre-approved for a home loan has many benefits:
With many mortgage lenders, getting pre-approved can be complicated and time-consuming. However, look for a trusted lender with these traits to streamline the lending process:
Get a mortgage without the mess.
February 10, 2023
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