What is a pre-approval?
A pre-approval is a letter from a bank or mortgage lender that says what kind of mortgage they would give you and how much they are willing to finance. It's basically a promise from the bank saying, "This is what we are willing to give you."
Why do I need a pre-approval?
First, without a pre-approval, you don't know how much house you can afford. You could assume you could afford a $250,000 house, but find only you are only approved for $190,000 - how disappointing! On the flip side, you could assume you would only qualify for $150,000, go see several homes, then find out you can afford up to $200,000! Exciting news, but now you feel like you've wasted time looking at cheaper homes that you didn't even like.
Secondly, even if your agent is willing to show you homes before you get your pre-approval, most listing agents are not willing to accept an offer from a buyer without a pre-approval. I suggest my client's have their pre-approval before we begin looking, so that when we find the house of their dreams, they are ready to make an offer. If you have to spend two days getting a pre-approval before submitting an offer, another buyer could submit an offer by then and you could lose out.
Is a pre-approval the same as a mortgage?
No, it's more of a promise. Once you are under contract, you still need to reach out to your mortgage lender and apply for the mortgage.
How long is my pre-approval good for?
Different lenders have different rules. Typically your pre-approval is good for 60-90 days. After that, you'd have to get a new one.
How long does it take to get a pre-approval letter?
Probably a few days, depending what bank/lender you're working with. One mortgage lender I frequently work with, Jeff Kraus from Mortgage America, has been known to have a turn-around time of less than one hour! Apply with Jeff here.
