How long is an AZ mortgage approval valid?
How Long is a Mortgage Pre- Qualification Good for in Arizona?
The best thing an Arizona homebuyer looking to purchase their dream home can do is to get pre-qualified for their new home loan well before they set foot into any property. Doing so (getting pre-qualification early) offers a buyer the following advantages:
1. Gives the buyer a very specific price range that they qualify for
2. Uncovers any potential hidden surprises before the buyer is financially committed (earnest money etc…)
What happens if a buyer gets pre-qualified and then does not find a home for 1, 2 or even 3 + months? Is their original pre-qualification still good? When does the original qualification expire? All good questions. Let’s jump in a little deeper to explore how long a mortgage qualification is good for in the Phoenix area.
A mortgage pre-qualification is technically good for 90 days from the date that a loan applicant’s credit report is generated (“pulled”). However, this is the most basic and generic answer to “how long is a pre- qualification good for ?” and it is based solely on the life/validity period of a credit report. A credit report is valid for 90 to 120 days depending on what type of loan the applicant is applying for (FHA, VA, USDA or Conventional). However, when looking at the life of a mortgage pre-qualification. the one and only element that a AZ mortgage lender can accurately and definitively set a time limit on is in fact the applicant’s credit report. The rest of the information that goes into a pre-qualification has a much short shelf life.
To make more sense of this let’s outline the other main components of an AZ Mortgage Pre- Qualification. A lender is typically looking at:
1. Borrower’s Income
2. Borrower’s Assets
3. Borrower’s Employment
While many lenders state that a home loan pre-qualification is “good for” 90 days, a pre-qualification is only “good” if the borrowers income, assets and employment remain the same as they were when the borrower completed a loan application. This is an important detail to consider when searching for a home. An AZ mortgage company will be able to utilize the credit report they pulled for 90 days on an FHA/VA/USDA loan and for 120 days on a Conventional loan. All other information (income, assets etc…) will need to be updated and verified by providing the most recent relative documentaion (paystubs, bank statements etc…) once an AZ buyer enters into a purchase contract on a property. If a buyer goes under contract and has a closing date
that exceeds either the 90 day or 120 day credit report timeframe listed above, a new valid credit report will need to be generated by their AZ mortgage lender . If a borrower’s credit data has changed (including but not limited to their credit score) their mortgage qualification may also change as a result. If any of the information related to income/assets/employment changes after an initial loan application and prior to a buyer’s closing date the original pre-approval is no longer valid. Mortgage qualification is based on the most recent/current income and asset information available.
When To Pull a Credit Report?
When should an Arizona mortgage lender “re-pull” an applicant’s credit report. My advice is to pull a new credit report as early as possible if you know and your mortgage lender knows your credit report will expire prior to your closing date. Pulling a new report (when necessary) reveals any possible credit related challenges and when it comes to credit challenges sooner is absolutely better. A lower credit score, a late payment, an unknown judgment/lien can all pop up unexpectedly and can significantly impact an existing mortgage approval. The sooner a Phoenix area loan officer knows about these little credit related surprises the more time they have to help a buyer react. The flip side to pulling a fresh credit report is waiting until the last minute. Imagine re-pulling a credit report just two days before closing and having a collection account show up dropping the buyer’s middle credit score 65 points. With 2 days left until closing, the buyer and their lender will be left to scramble to try and remedy the situation. Most likely, they will end up being stuck with their brand new low score and all of the related consequences. In many caes this situation (a lower credit score) results in a higher interest rate and/or higher closing costs (due to a lower credit score). If the lender and the buyer know about this kind of surprise at the beginning of a transaction they could give themselves 30 days or so to find a way to try and counteract the decreased score. The extra time would allow the buyer to have a fighting chance to avoid an increase to their interest rate and/or closing costs.
Mortgage Pre- Qualification is very important when shopping for a new home. Getting pre-qualification is the first step any Phoenix area homebuyer should take. Keeping a pre-approval fresh and up to date will not only prevent costly surprises from popping up, it will also tell sellers that your approval is up to date and reliable. If you have any questions about getting qualified please do not hesitate to call me.