How long do lenders typically honor a Pre-Qualification?

33 Replies

Hello everyone!

My question is pretty simple and straight forward.

How long do lenders typically honor a Pre-qualification?

I plan on using either an FHA or a VA loan when I get home from overseas in about 2 months to purchase a 4 unit. I am pondering getting pre-qualified now in order for Real estate agents to take my inquiries more seriously and to get that portion squared away ahead of time but fear I will have to get re-approved later, have another credit mark, and have to go through the process again.

Thank you for the help and advice!

Jordon   

@Jordon Nichols It is a simple enough seeming question but of course it is more complicated in our business. There is a difference between a pre-qual and a pre-approval. And different lenders seem to call them different things. I guess the first question for the lender would be, what is all done with a pre-approval or pre-qual? Is it just a credit pull? Ask them to describe. 

If it is just a credit pull, then you may be looking at a 90 to 120 day window. If it is meant to be based on income and asset docs, those are only going to technically be good for a 60 to 90 day window before they "expire". 

It sounds like you are also worried about inquiries and re-pulling credit. I would say maybe wait until you are within 30 days or so and move forward with the pre-approval with someone. 

With a preapproval, a prequal is useless, there really is nothing to “honor”......it is Not a committtment.  It basically says if the borrower didn’t lie or hide anything and their finances don’t change, we will probably be able to give them a loan.

@Jordon Nichols

Pre-qualification is not as solid as the Pre-Authorization.  Pre-qualification is more of an honor system where you tell them some basic info and they can tell you what you may qualify for.  Pre-authorization requires more documentation including a credit pull, income (W-2), etc.  Lenders will typically honor pre-authorizations between 60 to 90 days.  Obviously, do not make any major purchases or something else that would affect your creditworthiness leading to and during that timeframe.   

This is also where relationships help if you have a lender that you have been working with and he understands your overall financial position, he can be a bit more flexible; as @Jeff Dulla mentioned, I would wait until you are closer to actually making offers to get a pre-authorization.  

If your credit is marginal enough that a credit inquiry makes a difference, you shouldnt be buying a house. But its likely you are simply overestimating the effect of an inquiry. 

Ok thanks for the information everyone. From what I've gathered I will wait until I'm closer to get "Pre-authorized".

My credit is not marginal It is well above approval for FHA or VA I have just had problems with RE agents and sellers taking my inquiries seriously. They ask if I've been pre-approved then don't respond when I ask for information.

This is probably mainly a problem with bad RE agents.

Thank you

I have always heard 90 days. Remember your income and credit situation may change in 3 to 4 months. I would refer this question right back to your lender. 

@Jordon Nichols Once an agent has spent a week or two showing properties to a “buyer” only to find out they Can’t get a loan, they look at it differently.

And yes, Real investors Do know to show a preapproval, or a cash POF......SOP when dealing with a Professional agent, as they're going to have to produce one to go along with an offer anyway.

It is indeed somewhat of a judgment call though. In your situation, an agent may spend some time sending you info, listings and such since you’re still out of country, but if they’re any good they will require one before actually spending time scheduling and showing properties.

Originally posted by @Jordon Nichols :

@Wayne Brooks doesn't sound like a great strategy if you are trying to make money as an RE agent.  Investors don't walk around with a pre-approval in their pocket because there's no reason for it when you know you will be approved. 

 They'll talk to you to encourage you to get preapproved, and maybe show one house to get you motivated to do so, but that's a different thing than spending 2.5 hours showing you 10 houses this weekend.

YMMV depending on if you use one of the part time PTA parent agents that are seemingly multiplying in number of late, of course.

Originally posted by @Jordon Nichols :

@Wayne Brooks doesn't sound like a great strategy if you are trying to make money as an RE agent.  Investors don't walk around with a pre-approval in their pocket because there's no reason for it when you know you will be approved. 

 Yes as a matter of fact investors do always have preapprovals.  People who dont are not serious buyers.  I dont show a single property to someone unless they have a preapproval, nor would I look at an offer or inquiry from someone on one of my listings without a preapproval.

Yeah I can definitely understand that. I'm sure that is a pain when dealing with people who might not be completely sure they can even buy a property. 

I'll continue to look on my own until closer to when I can actually close. 

Originally posted by @Jordon Nichols :

@Russell Brazil so you're telling me that everyone who browses the MLS on a daily basis has a pre-approval in the pipes constantly and gets another pre-approval every 90 days?

 Not every one....just the ones serious about buying.

@Russell Brazil

Let me remind you of the original question. 

How long is a pre-approval typically good for. 

I don't come home from overseas for over 2 months.

The answer was about 90 days.. 

Why would I get a pre-approval if they last 90 days and I can't even view properties for about 90 days. 

In your theory I'm not a serious buyer because I don't have a pre-approval in my pocket while I'm overseas so you also would not send me information regarding postings. 

Sounds like a pretty solid plan! Why send a few e-mails to make a sale in 3 months let's just think about the now!  Instead lose an able buyer because e-mailing people back takes too much time. 

Originally posted by @Jordon Nichols :

@Russell Brazil

In your theory I'm not a serious buyer because I don't have a pre-approval in my pocket while I'm overseas so you also would not send me information regarding postings. 

 Most agents would be willing to sign you up for daily/weekly automated emails to show you homes that fit your criteria, almost all of which will of course be sold before you return. 

Once you're back and actually ready to write an offer, check if any of the ones you like haven't already been sold, and go from there.

At the end of the day real estate agents are salespersons, and salespersons generally activate when there's an able and willing buyer or seller -- a "market participant." 

The term for folks that like to look at homes they are not able/willing to purchase is "looky loo," they comprise something around three quarters of the people that show up to any reasonably well marketed open house. It's not a disparaging term, but an agent that spends too much time on them (keep in mind that they vastly outnumber actual market participants) will be going out of business shortly since time is their most valuable commodity. 

It's not a matter of like / dislike / rude / polite or any of that, it's a matter of the agent staying in business. Free glasses of water and bathroom use, at most restaurants, is a courtesy provided to current or (recognized) past customers, but not necessarily everyone asserting that they maybe will be a customer someday in the future.

good question  ….get pre approved now  using whatever  hypothetical scenario you want ….forward your updated paystubs and bank statements to your loan person  so that your  pre approval file can be  ready when you need to make an offer ….the  credit report  should be good for  90-120 days ….

@Jordon Nichols Typically I would say it’s 90 days. Not sure about you or your lenders but I can get pre qualified in under 30 minutes. Call the lender. Have them send me a link. Upload documents to cloud based portal. Done.

@Jordon Nichols - OK - There are some answers on here that are leading you in the wrong direction.  The real answer is that pre-approval is just an IDEA.  Sure - there is documentation that goes along with it, such as a credit report and pay stubs that can expire, but if that credit report or paystub has the SAME DATA in 90 days, the information is still good - therefore your approval is still good.  

A couple of points. FHA is going to require down payment, give you a 1.75% Funding fee, and a .85% Mortgage Insurance that is permanent and you will have to refinance it to remove it, so it is VERY unlikely that you should go FHA. The order of quality of loans is (in most cases with some exceptions) VA is better than Conventional - is better than FHA. FHA is generally a stepping stone to a conventional loan. And in most cases VA is better than Conventional...

With VA, you have to have a 60% max Debt to Income ratio. Meaning - your new (prospective) house payment PLUS other debt has to be under 60% of your gross income. So, take your BAH, BAS, and Base Pay, multiply it by .6, subtract your debt, and then you will have your max qualified payment. Now, if that information stays the same, your approval STAYS good! It doesn't change unless the data changes. If you buy a boat, obviously your debt goes up and your approval is affected. Yes, you will have to update documentation, but thats what I mean by pre-approval is a concept, and as long as you have an understanding of that concept and you don't screw up your numbers, your pre-approval doesn't expire, really.

So, thats why I say pre-approval is more of an idea than anything.  Most people here are saying the pre-approval expires because the DOCUMENTS expire.  But if the updated documents reflect the same data, the approval will be just as good, because the loan guidelines don't really change.   Make sense? 

So - another thing - you are wrong that you shouldn't get pre-approved right away.  Why?  Because a pre-approval (if done correctly) is really just a gameplan.  You can find out right now what to expect.  What to fix if necessary, how to get into the best possible position to buy.  Then, you don't update your documentation every 90 days, you just don't make any fundamental changes that would cause you to lose the ability to qualify.  But that is all in the education.  

VA loans (and FHA for that matter) are only for owner occupied property. So, you have to move in within 60 days. That does NOT mean you don't get pre-approved. Get pre-approved from someone who will EDUCATE you. PLAN with you. ADVISE you. With typical banks, yes, your pre-approval will expire and they will ask for more stuff. But any true value-add lender worth his/her salt makes it more about education and planning and advice, than just sending in documents with an expiration date. So it may be too early to buy, but it is NEVER too early to plan...

If you have any questions or need anything, I'm here to help.  

Daniel Lehman
Marine Corps Veteran

@Dave Skow

Ok that makes a lot of sense and is the sort of the answer I was looking for.

@Daniel Lehman

Thanks for all that information! Good to know that you would go with a VA over using the FHA for my first purchase. That is a question I have also been researching. Initially it seemed using the FHA for my first buy and VA for the second seemed like a good idea but with the PMI and other fee's associated your suggestion of going VA is what I will very likely use.

Because the pre-approval is really just the bank saying "yeah looks good unless anything major changes." I will definitely move forward with the pre-approval process. I'm sure it will be a good idea to shop around lenders for a bit as well and see who has the best offers.

@Chris Mason

I've definitely considered the fact that any good deal is not going to be on the market in 3 months. I probably shouldn't even be looking this far ahead if I'm not ready to close on something.

Getting a good idea of the market is probably a plus though. So that I can know a good deal when I see it later.

"Looky Loo" haha window shoppers are really that high of a percentage? Surprising people would waste their own time like that.

Originally posted by @Jordon Nichols :

@Chris Mason

"Looky Loo" haha window shoppers are really that high of a percentage? Surprising people would waste their own time like that.

 Eh, not really... how many old ladies do you know that have their TV affixed to the fake HGTV flipping shows 24/7? People like real estate.

My own grandma a few times a year says something silly about "you know shnokums, I've been thinking of becoming a flipper, could you help me with that?" (Not really but you get the idea)

Originally posted by @Jordon Nichols :

@Chris Mason

I've definitely considered the fact that any good deal is not going to be on the market in 3 months. I probably shouldn't even be looking this far ahead if I'm not ready to close on something.

Getting a good idea of the market is probably a plus though. So that I can know a good deal when I see it later.

"Looky Loo" haha window shoppers are really that high of a percentage? Surprising people would waste their own time like that.

Looky-Loos are common, but not on-purpose by their own fault. Many see a 750 score on Credit Karma (when their FICO 08 is 615) or some other nonsense-score site, then plug that into a rate estimator on Zillow or LendingTree or any other site, and then google "How much house can I afford" and get a huge "best case" number and think they can get approved for that. But there are SOOO many other factors that are in play.

I talk with folks who aren't pre-approved, but only engage them enough to have a buyer-consult and refer them to my preferred lenders. Beyond that, no offer will be accepted unless they have a preapproval, so there is no point in looking until we have that in-hand. Most markets move way too fast to spend time with someone who isn't yet ready to pull the trigger. 

As long as you are a realistic buyer as to your local market conditions (IE if its an appreciation market a la San Francisco, you aren't looking for 20% value-add c-class deals), then you should be able to get a property under contract QUICK, and as such there is no reason to start looking this far ahead.

@Chris Mason

Yeah tons of people especially when they are in the market for their own house. People are very into those shows. Then usually fail at actually flipping because they try to make the place look perfect with a massively expensive rehab.

@Matthew Olszak

Yeah I can see that as an issues. That's a major issue with car sales as well. They come in thinking they can get approved for a 35 grand car cause they have 2k to put down.

I will have to order my FICO 08 score now to see how different it is.

The main reason for looking ahead this far is to get a good feel for what average deals look like so when I see a good opportunity later I will know.