Getting prequalified for a home loan before you start your home search has a number of advantages. Prequalification is an offer (but not a commitment) from a lender to lend you up to a specified amount of money for a home loan. There are a number of advantages to getting prequalified for a loan. It lets you know how much house you can afford. It also signals to the seller and the real estate agent that you are a serious (and able) buyer. Some real estate agents won’t even show you homes until they see your prequalification letter.
How Prequalification Works
The prequalification process is relatively easy. The lender will perform a credit check and ask you a number of financial questions on the application. In most cases, you’ll be asked about income, debt and bank balances, but you won’t have to produce documents to support your answers. That usually happens in the preapproval or loan approval process. You’ll also be asked how much money you have to contribute to the home purchase as a down payment.
You can generally get a quick answer to your prequalification application, often within one or two business days. When your application is approved, the lender will send you a letter stating how large a loan you are prequalified for.
Will My Prequalification Letter Be Valid Next Year?
As we approach the end of the year, you might be wondering if that prequalification you obtained earlier in the year will still be valid as we move in 2022. What happens if you can’t find the right house at the right price before December 31st?
Prequalification letters are generally good for a set period of days or months. The industry standard is 90 days, but that number can vary. The good news is that the year doesn’t matter as long as your within the stated time period on your letter. Lenders limit the time that a prequalification letter is valid because life tends to alter one’s circumstances over time. For example, your income might change. Your debt might increase or decrease, and you might welcome new dependents into your family.
Once the time limit expires on your prequalification letter, you’ll need to reapply to the same or alternate lender. For this reason, it’s a good idea to wait until just before you’re ready to start your home search to talk to a lender about prequalification.
To learn more how owning a home can give you and your family the security you deserve, contact The Potempa Team at OneTrust Home Loans. Our team can help you find the mortgage that will work best for your family’s unique situation and help you get into a home quickly and without an unnecessary hassle.