For most, the mortgage process begins in earnest with a pre-approval. This first phase marks the beginning of the homebuying journey and encompasses the discovery period during which the lender seeks to verify whether or not a prospective buyer is likely to qualify for a mortgage, and also determine the value of the loan for which the applicant is likely to be approved.

Unlike a pre-qualification which which can be viewed as a quick, unofficial (sometimes inaccurate) estimation of how much a prospective buyer may qualify for, a pre-approval is a comprehensive step which results in the issuance of an official pre-approval letter by the lender.

During the pre-approval process, the lender will pull credit on the applicant, and request a number of documents to check and verify identity, income, credit, tax returns, assets and liabilities, and through a series of calculations determine if the applicant qualifies for a loan, for how much, the interest rate for the mortgage loan and other terms and conditions. The pre-approval letter which is issued at the end of this first step, is a powerful tool which can be used when shopping for a home to make validated offers to home sellers.

But pre-approvals are not without an expiration date. Indeed they expire and if or when they do the procedural process must be redone. This means a new credit check, and a re-assessment of all the factors that played a role in the initial qualification/approval process.

Typically after 90 days, the pre-approval expires.

Most lenders place an expiration date of 90 days on the pre-approval letters that they issue. This helps ensure that the qualifying information about an applicant's financial profile has not changed, and/or is kept up-to-date. If there have been changes, the process serves to ensure that the applicant can still qualify for the loan and at the same interest rate.

Fortunately, the process of renewing a pre-approval usually goes a lot faster than the first time around. In fact, assuming no changes (or no adverse changes in the applicant's financial profile) most lenders can make quick work of renewing the pre-approval and issue a new pre-approval letter, as the groundwork of document gathering had been done the first time around and a lot of of the information is already on file.

Summary

A pre-approval is the all-important first step you will take on your mortgage journey. This process involves the discovery, document collection, credit-checking and other verifying/qualifying activities performed by your lender. At the end of this process, the lender will issue a pre-approval letter which is an official offer to lend, establishing that the applicant is pre-approved for a mortgage loan for a specific amount, at a specific interest rate and other disclosed conditions. The pre-approval letter is typically good for 90 days, after which your lender will seek to recheck credit, assets, liabilities and other qualifiers to ensure that you still qualify (for how much and at what rate).

If you are ready to begin your homebuying journey, you are in the right place. Please contact your local Diamond Residential Mortgage branch location and together let's get it done!