You pay attention to expiration dates, don’t you? When you visit the grocer and buy a carton of milk, you look at the expiration date, right? And when listing your home and you receive an offer, do you also get a buyer’s preapproval letter from a lender? That letter has an expiration date, too. And it’s an important one.
Dates matter, and when it comes to mortgage loans, it’s no different. The buyer has to obtain financing before a certain date in order to close on time. The appraisal has to be performed before a certain date in order to ensure a timely closing, allowing the lender enough time to review the loan application.
The date on your buyer’s approval letter is also important. And if it’s more than 30 days old, you need to exercise a bit more caution. Why?
First, mortgage rates can change daily, sometimes even during the course of a single business day, depending upon market volatility. If someone is approved at 3.50 percent but rates have moved over the previous few weeks to 4.50 percent, is the buyer’s preapproval letter still valid?
Further, if the date is beyond 60 days out, that leaves plenty of time for critical financial information to change. Has the buyer’s income dropped since they first applied for a home loan? What about credit, are the credit scores still worthy? And speaking of credit, you never know if a buyer has made a major purchase and borrowed additional money after the preapproval letter was originally issued.
It happens. Loan officers can tell you stories about how a couple didn’t pay attention to the loan officer’s advice to simply “stand pat” during the home loan approval process and avoid buying anything or even applying for additional credit until the loan is closed.
Usually this won’t be an issue, especially if the buyers are working with a buyer’s agent. Yet if you receive a preapproval letter with an old date or even no date at all, ask for an updated letter. Dates on preapproval letters mean things; make sure the date isn’t expired.