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How long does it take to get a mortgage pre-approval?
How quickly you can get pre-approved for a mortgage and get a pre-approval letter depends on a few factors, including how quickly you can supply the required documentation to the lender, plus the lender’s mortgage pre-approval process. On average, it takes 7-10 days to get a pre-approval, although in some cases it may take less time.
To speed up the home loan pre-approval time, you should gather your financial documents that the lender will require (e.g., W2s, proof of income, tax returns, etc.).
It’s also helpful to have an idea of how much you can afford to pay each month in mortgage payments. This Mortgage Qualifier Calculator provides an estimate of your monthly payment and will help you determine how much you can spend on a new home.
At Credit Union of Southern California (CU SoCal), we make getting a mortgage easy!
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.
Read on to learn more about how long it takes to get a mortgage pre-approval.
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What is a mortgage pre-approval?
A pre-approval is a rough estimate of a loan amount and interest rate that a lender gives to a homebuyer. This information provides homebuyers with a fairly accurate idea of how much they can afford to purchase.
To get a mortgage pre-approval, you, the borrower, must provide the mortgage lender with details about your finances. This information includes your income, assets, debt, and how much money you have for a down payment.
The lender will ask your permission to check your credit score. Once you have provided the necessary information, it will take a few days for the lender to verify the information and issue you a pre-approval letter. The letter will state how much you are approved to borrow, the interest rate, and how long the approval is good for.
A mortgage pre-qualification is similar, but it is based on information you state, rather than any documents you provide the lender.
What information is on a mortgage pre-approval letter?
All pre-approval letters are good for a specific amount of time, such as 30, 60, or 90 days. After that period ends, the terms of the approval will expire. This is because interest rates fluctuate and could affect the amount of the loan you qualify for.
This information is included on the pre-approval letter, in addition to the name of the loan program, the maximum property purchase price, the interest rate, loan amount, your down payment amount, and sometimes the property address.
Mortgage pre-approval vs. pre-qualification: What's the difference?
Here are some basic differences:
| Pre-Qualification | Pre-Approval |
|---|---|
| Borrower’s financial information is stated; no documents required. | Limited financial information must be provided. |
| Credit score may be a “soft pull” or not verified by the lender. | Lender will do a “hard pull” of the borrower’s credit score. |
| Provides a rough estimate of qualifying loan amount. | Provides a specific loan amount and interest rate. |
| Good for planning ahead and budgeting for a home purchase. | Good for homebuyers who are ready to start house-hunting and making offers. |
If after speaking to several lenders you are not able to get pre-qualified or pre-approved, you may need to build or repair your credit score and save money to buy a house.
Mortgage pre-approval requirements
- Proof of income. This includes paystubs, W-2s, (1099s, if you are self-employed), and tax returns.
- Proof of assets. You will be asked to provide recent bank statements for checking and savings accounts, and some lenders will want to see your investment and retirement account statements.
- Good credit. All lenders will want to know you are credit-worthy before loaning money in the form of a mortgage. Credit scoring is a system creditors and lenders use to help determine whether to give someone credit or a loan. The most widely use credit scores are FICO scores, which range from 350 (high risk) and 850 (low risk). The higher your credit score the easier it will be to get pre-approved, and you will likely be approved for a lower interest rate.
- Employment verification. If you have an employer, your paystubs will show that you receive income. If you are self-employed you will need to provide profit-and-loss statements and both personal and business tax returns.
- Driver's license. A government-issued photo ID will be required for a pre-approval and when you complete a formal loan application.
- Social security number. This is also required by the lender so that your identity, credit score, and other information can be verified
Other factors affecting a pre-approval
Debt-to-income ratio (DTI). To calculate your DTI ratio, add all your monthly expenses (debt payments) and divide that number by your gross monthly income (before taxes). Most lenders look for a DTI ratio between 35% and 50%. If you’re planning on purchasing a home using a mortgage, then it’s smart to avoid increasing your DTI. This means you should not make any large purchases requiring new debt, such as a car loan.
Loan-to-value ratio (LTV). The LTV on a mortgage loan compares the amount of the loan to the value of the property. LTV = (the amount of the loan ÷ Appraised value of the property) × 100. Typically, lenders will approve a mortgage with an LTV from 55% to 95%, depending on the type of mortgage program, the borrower’s credit score, and down payment amount. The higher the LTV, the more risk there is for the lender.
How to get pre-approved for a mortgage
Here are the six basic steps to getting pre-approved:
- Check your credit score. According to the credit bureau Experian, a credit score of 620 or higher is typically needed for a conventional mortgage. Some government mortgage programs require a credit score of at least 580. Get your free Annual Credit Report.
- Calculate your DTI. To calculate your DTI, add all your monthly expenses (debt payments) and divide that number by your gross monthly income (before taxes). A DTI under 36% is preferred.
- Gather the necessary documentation. This includes your driver license, social security card/number, pay stubs, bank statements for savings and checking accounts, investment account statements, W-2s, 1099s, tax returns, and debt payment statements for other loans (such as student loans and auto loans). If you are self-employed, you will need to show a year-to-date profit and loss statement and business tax returns. All these documents will be used for the formal mortgage application as well.
- Shop different mortgage lenders. Mortgage pre-approval is available from many types of lenders, including credit unions, banks, and online lenders. However, it’s always smart to start the process by speaking with the financial institution where you currently have an account. You may qualify for special interest rate promotions or fee discounts.
- Complete and submit the application. You may submit pre-approval applications with several lenders to see which one can provide you with the best interest rate and terms for your unique needs.
- Pre-approval letter. If approved, the lender will send you a pre-approval letter. All pre-approvals are good for a specific amount of time, such as 30, 60, or 90 days. When the pre-approval expires, the interest rate and other terms of the approval will expire. This is because interest rates fluctuate and could affect the amount of the loan you qualify for.
Learn how to get pre-approved for a home loan in 6 easy steps
If you are not able to get pre-approved due to bad credit or a low credit score, you may need to follow these tips for building your credit score.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
Get Started on Your Mortage Today!
