How many preapproval letters should I get for a home loan?

Can you get multiple mortgage preapproval letters?

You bet! You can get preapproved for a home loan as often as you need. Every mortgage preapproval letter comes with an expiration date. And if the preapproval expires, you’ll need a fresh one to continue house hunting and making offers.

In today’s real estate market, finding your dream home can take a few weeks to several months. It can be quite common to need multiple preapprovals, and you should be sure to stay current because you’ll need a valid letter in hand when you find the home you want.

In this article (Skip to...)

• Preapproval letters
• Multiple preapprovals
• Preapproval expiration
• Preapproval extension
• Preapproval vs. prequalification
• How to get preapproved

What is a mortgage preapproval letter?

A mortgage preapproval letter shows that a lender has checked your finances and is willing to lend you a certain amount to buy or refinance a home. The preapproval establishes your home-buying budget — and it acts as proof to sellers and real estate agents that you’re a serious, qualified buyer. It should be the first step in your home-buying process.

Keep in mind that a preapproval is not a binding offer on the lender’s part. Once you’ve made an offer on a home, you’ll need to go through full underwriting and get final approval based on your property details.

But, if all your information holds up in underwriting, the loan amount and terms on your finalized mortgage loan should match or closely resemble the preapproval letter.

How many preapproval letters should I get?

While many home buyers will only need one mortgage preapproval letter, there really is no limit to the number of times you can get preapproved. In fact, you can — and should — get preapproved with multiple lenders.

Many experts recommend getting at least three preapproval letters from three different lenders. Each mortgage lender will give you a unique offer with its own interest rates, loan amounts, origination fees, and other upfront closing costs. Getting multiple preapprovals will help you compare those rates and terms to find the best, most affordable home loan.

What if my preapproval letter expires?

If you’ve already settled on a mortgage lender, you may still need to get preapproved more than once. Preapprovals often expire after 30-60 days. And if you haven’t found a home within that timeframe, you’ll have to renew your application. But don’t worry; there’s no penalty for getting preapproved multiple times, and preapproval is free with most mainstream lenders.

In a buyer’s market, when there are more homes for sale than buyers who want them, many house hunters find their dream home within weeks or a few months. They often find it easy to get their offers accepted. So preapproval renewals are required less often.

But, in a seller’s market, it can take house hunters many months — or even years — to find a place and have their offer accepted. They could need multiple preapprovals throughout their home-buying process. So don’t be shy about repeatedly renewing your letter, or even obtaining letters from multiple lenders.

Tips for getting multiple preapproval letters

It’s important to recognize that you’re not making a commitment to a lender when you get preapproved. You can and should comparison shop for the lowest mortgage and fees before settling on a lender.

You probably want to call each company on your shortlist and ask:

1. Do you charge for preapproval?
2. Will you do a hard or soft credit inquiry?
3. How long will my preapproval letter last before it expires?

There’s nothing wrong with choosing your preapproval lender based on those criteria. After all, you’ll be comparison shopping later and can switch companies then if you find a better deal. However, you want to be as sure as you can be that your preapproval lender offers competitive rates. Because the amount you can borrow will be lower if your quoted rate is artificially high.

How long does a preapproval last?

Each lender decides how long its preapproval will last. Usually, mortgage preapproval letters are good for 30, 45, or 60 days. A few lenders used to have 90-day expiration dates and you might still find one, though that’s less common now.

“The reason for this is that while the documentation used to pre-approve you lasts 90 days, the letter is specific to the home an offer is being made on,” says Jon Meyer, licensed MLO and The Mortgage Reports loan expert. “So while rates are moving, it can actually look better in the offer to have a more recent letter.”

At the time this was written, mortgage rates had been rising sharply. And rising rates affect preapproval letters.

Suppose you’re approved to borrow $250,000 at a 6.5% rate. If mortgage rates suddenly jump to 8%, your monthly payments would be appreciably higher, and you probably couldn’t afford such a large loan amount. So, when rates are rising quickly, mortgage lenders might shorten the validity of preapproval letters.

Can you extend a mortgage preapproval letter?

Preapprovals typically can’t be extended, but they can be renewed. The difference is that your financial information will need to be re-verified; you can’t just extend your preapproval based on previously submitted information. Many lenders will want to see the latest versions of your preapproval documents. Those include recent pay stubs and bank statements, to name a few.

“These documents have validity timeframes,” explains Meyer. “For example, your most recent bank statements cannot be more than two months old.”

You can understand why. The mortgage lender needs to know that your employment and financial situation haven’t changed.

Expect to see your maximum loan amount reduced if mortgage rates have risen significantly since you were last preapproved for a home loan. If this is the case, then you may now only be able to afford a smaller mortgage. On the other hand, if rates have fallen since you last got preapproved, that could help lower your monthly payment and boost your home-buying budget.

Will multiple preapprovals hurt my credit score?

Some lenders carry out “hard credit inquiries” when you apply to get preapproved. That means your credit score will take a small hit each time (usually less than 5 points on your FICO score).

If you get preapproved multiple times within a few weeks — which can happen when you’re shopping for mortgage rates — only one hard inquiry will count against your credit score. But if your preapprovals are spread out over many months while house hunting, your credit history may take multiple small hits.

Some lenders make only a “soft credit inquiry” during preapproval, which doesn’t affect your score. Though there will be a hard inquiry later when you apply for your actual mortgage loan.

Does it cost money to get preapproved?

Nowadays, fewer mortgage lenders charge fees for preapprovals. Those that do usually deduct the fee (often $300-$400) from your ultimate closing costs, assuming you get your mortgage from them.

Preapproval vs prequalification: What’s the difference?

You’ll likely see the terms “preapproved” and “prequalified” when you begin looking for your dream home. They’re often used interchangeably which can confuse homeowners and buyers alike, especially first-time home buyers. Yet, they are considerably different from each other.

• Prequalification is simply an estimate based on self-reported financial information, whereas a preapproval requires you to submit financial documents for verification
• Mortgage prequalification doesn’t typically pull your credit report. Instead, it uses a “soft pull” to get a general picture of your credit history. A preapproval involves a hard credit check that will impact your credit score
• Prequalification doesn’t verify your debt-to-income ratio (DTI), but a preapproval will. Borrowers with a DTI below 43% are typically eligible for conventional loans, as well as government-backed FHA, VA, and USDA loans

Getting a prequalification is quick and easy. But the extra time it takes for the preapproval process is likely worth it.

Typically, preapproved buyers are taken more seriously by real estate agents and Realtors. Those who are prequalified or unqualified are often immediately rejected, even if they offer thousands of dollars more than anyone else. They’re seen as a higher risk because nobody knows how likely they are to close.

How to get preapproved for a mortgage

The preapproval process is straightforward and can usually be completed online. Here are the steps you’ll take to get preapproved.

1. Evaluate your financial situation

It’s always a good idea to have a general sense of your financial health before applying for mortgage preapproval.

• Check your credit history. You can obtain free copies of your credit reports once a year from annualcreditreports.com. Review your credit file for accuracy and dispute any negative marks. Improving your FICO score can result in lower mortgage rates, which can save you thousands of dollars on the life of your loan
• Calculate your debt-to-income ratio. Your debt-to-income ratio is your monthly debt repayments divided by your gross monthly income. Lenders use your DTI to determine how much of a monthly mortgage payment you can comfortably afford

This information will help you find a comfortable budget for your home price and mortgage payment. It will also help inform which type of mortgage loan you should use.

2. Start your preapproval application

When you’re ready to get preapproved, start by choosing a mortgage lender. Remember that your choice isn’t biding right now; you can change lenders before you finalize the loan if you wish.

Most lenders offer online preapproval. You can apply through a portal on the lender’s website and submit documentation digitally. This helps streamline the preapproval process so you can get your approval and begin house hunting more quickly.

If you want, though, you can also get preapproved over the phone or in person if your chosen bank or lender has brick-and-mortar branches in your area.

3. Submit your documents

Expect to provide your lender with a variety of financial documentation that they’ll use to confirm your eligibility. Borrowers will typically submit these documents along with their mortgage application:

• Pay stubs for the past 30 days
• W-2s or 1099s (if self employed) for the past two years
• Tax returns from prior two years
• Bank statements from the previous two months
• Estimated down payment
• Rental history (for first-time home buyers)
• Legal identification

If you have issues with your credit history, unusual deposits in your bank accounts, or alternative sources of income, your loan officer will likely request further information.

4. Receive your home loan preapproval letter

Your loan officer will verify your income and personal finances and run a credit check to determine your creditworthiness. If you’re eligible for preapproval, you will be issued a preapproval letter that details your maximum loan amount, estimated mortgage rate, loan type, and loan terms.

You’ll undergo a similar process again when your final mortgage application goes through the formal underwriting process.

What happens if rates rise after I get preapproved?

Your preapproval letter will specify both how much you can borrow and the mortgage rate on which that sum is calculated. The first is contingent upon the second.

Keep in mind that you can only lock your interest rate after you have a purchase agreement in place. So you won’t be able to lock in the interest rate for which you’re preapproved. It’s still subject to change up until the time your offer is accepted.

So if mortgage rates rise while your preapproval remains valid, the amount you can borrow will fall. Mortgage rates often go up and down daily or more frequently. And you can’t keep updating your letter that often.

What you can do is track mortgage rates every day to see where they’re going. And use a mortgage calculator to see the likely impact of changes on your maximum purchase price.

When you’re ready to make an offer, call your mortgage lender for the current amount. If mortgage rates are rising especially sharply, you want to comparison shop, make your application, and lock your rate as soon as possible.

How to start the mortgage preapproval process

Time your preapproval to coincide with the start of your serious house hunting. You don’t want to get it too early because its expiration clock will start ticking on the day it’s issued. But you do need that letter on time because it will tell you your home-buying budget. And, because you might luck out and find somewhere you love quickly.

If you wish to be seen as a legitimate buyer, you need to keep your preapproval letter current. Note the date on which it expires on your calendar and be sure to apply for a new one in plenty of time. If you don’t, you run the risk of finding your ideal home after your letter has expired.