The loan pre-approval process usually lasts 1 to 3 days. And the availability of supporting documents, such as proof of income, credit score, assets statement, and pre-approval letter, affect how long loan pre approval last.
During the pre-approval process, the lenders will assess your financial standing. Once you qualify, you’ll receive a pre-approval letter, which is valid within 60 to 90 days. For home and car loans, a pre-approval letter speeds up the buying process.
What is a loan?
A loan is an amount of money borrowed, which needs to be paid back within a specific time with interest. There are many types of loan, two of which are home and car loan1.
Loan payments are done monthly with interest and penalties for delays. The duration of payments depends on the contract with the provider and financial capacity of the borrower.
A home loan refers to the financial assistance banks and financial institutions offer to help people buy or renovate their homes.
An auto loan is just like other types of loan. This is given to qualified people via the car dealer or bank.
How does loan pre-approval work?
The pre-approval process depends on the guidelines of the bank or dealership. But what seem common in many processes are the following steps:
- Although not necessary, it’s best to undergo the pre-qualification process first. Undergoing the prequalification process helps you estimate the amount you’re allowed to borrow, while pre-approval states exactly how much you can borrow.
- Set an appointment for pre-approval. And make sure to bring your financial documents, such as recent bank statements, credit history, proof of income, valid license, statement of assets, and tax return.
- Wait a couple of days or weeks for the lenders to assess your documents.
Consider submitting your application to different lenders. That way, you can shop around for the best deal. You’ll receive a pre-approval letter if you meet the lender’s requirements.
Your application will be approved or rejected based on the following factors:
- Risk related to the property you’re planning to buy.
- Changes to your financial status
- Changes to the interest rate.
Why do you need a pre-approval letter?
Take note of how long is a preapproval letter good for when buying a home, car, or other properties using a loan. Although a having a pre-approval letter isn’t a guarantee that you’ll be granted a loan2, this will greatly help expedite your property buying process.
With a pre-approval letter, you’ll enjoy the following benefits:
- Negotiate the price of property more effectively
- Get a priority ticket at auctions, knowing that you already have a financing option
- Validate your financial capacity to buy
- Builds your credibility of being a serious buyer
How long is a pre-approval letter good for?
A pre-approval letter is valid within 60 to 90 days3.
How to get a mortgage pre-approval?
Follow these steps to apply for a mortgage pre-approval:
- Set an appointment with the lender.
- Submit details of the property you want to buy.
- Submit the requirements:
- SS number
- Copies of valid ID (e.g., Driver’s license)
- Tax documents
- Residence details
- Income and asset statements
- Credit information, including debt, monthly expenses
Should you lock your pre approval rate?
You can lock in your rate only after the initial approval of the loan. Lock your rate only if you’re positive that the interest rate can’t get any lower.
Rate locks are usually within 30, 60, or even 120 days4.
Getting pre-approved for a loan increases your chance at buying your dream property. Yes, many people consider this process daunting. But you can actually get this done effectively if you know the procedures well and have all the requirements.