Mortgage offers are good for varying lengths of time based on a number of factors. The loan approval process involves several steps, including loan pre-approval, signing a sales contract, receiving mortgage commitment and locking in the interest rate. You can complete some of the steps quickly, but others take longer. Depending on what information is needed and how promptly the lender receives it, mortgage loans process at different speeds.
A mortgage pre-approval letter generally is good for 60 to 90 days, notes Realtor.com. The letter says a borrower is approved for a home mortgage as long as the lender can verify the information on the loan application as being accurate. Home buyers often apply for pre-approval before they even start shopping for a home. However, not until they make an offer on a home will the lender conduct a final verification of their credit, employment and income data.
The real estate sales contract you sign will include the home’s sale price, any contingencies, a mortgage loan commitment date and closing date. Stay in touch with your real estate agent and lender because if it looks like your loan isn’t going to be approved by the date on the purchase contract, you will need to ask the seller for more time. Delays occur often, so the seller may agree to give you an extension. Still, get it in writing.
After the underwriter receives all the information required to process your loan, such as verifying your financial information and ordering a property appraisal and title search, you will receive a written mortgage commitment letter from the lender. Because mortgage commitment depends on numerous factors, the time it takes to receive a commitment letter varies. When you get the letter, it will state that you qualify for a mortgage and indicate the amount of the loan and for how long the commitment is valid. A commitment letter will also outline any additional conditions you must meet before closing on the loan.
Once you have been approved for a mortgage, you can lock in the interest rate. Although a rate lock is only valid for a specified period of time, normally, lenders will lock a rate for 30, 45 or 60 days. Some lenders allow you to lock in a rate for as long as 90 or 120 days, but locking it longer will cost you more. The loan officer with whom you are working can help you determine the best timing for locking your mortgage rate.
- Citizens Bank: What Is Mortgage Pre-Approval?
- Reed Mortgage Corporation: Pre-Approval vs. Loan Commitment
- Bankrate: When Should You Lock a Mortgage Rate?
- Federal Housing Administration. "Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance Fund," Page 52. Accessed April 10, 2020.
- My Fico. "Loan Savings Calculator." Accessed 10, 2020.
- Fannie Mae. "Underwriting Factors and Documentation for a Self-Employed Borrower." Accessed April 10, 2020.
- Internal Revenue Service. "Form 4506-T: Request for Transcript of Tax Return," Page 1 - 2. Accessed April 10, 2020.
- Internal Revenue Service. "Form 8821: Tax Information Authorization," Page 1 Accessed April 10, 2020.
- Internal Revenue Service. "Form 4506: Request for Copy of Tax Return," Page 1 - 2 Accessed April 10, 2020.
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.