When does a preapproval letter expire, and how do you renew it?

Why letters expire

When you get preapproved, the lender reviews your credit report, pay stubs, bank statements and often tax returns. Loan programs limit how old those documents can be when the loan closes, so a letter based on them can only be relied on for so long. Lenders also know that jobs, balances and credit change over a few months.

The expiration date on your letter is the lender's own choice. It may be shorter than the program limits, but it is rarely longer.

The document age rules

Two sets of rules drive most letters:

• FHA. HUD's Handbook 4000.1 says documents used in origination and underwriting may not be more than 120 days old at the disbursement date. Appraisals have their own validity rules, and documents that do not change over time, such as divorce decrees or tax returns, are exempt. HUD counts day one as the day after the document's issue or effective date.
• Conventional loans sold to Fannie Mae. Fannie Mae's Selling Guide requires credit documents, which include credit reports and employment, income and asset records, to be no more than four months old on the note date. When there are consecutive statements, the newest one counts.

These limits apply at closing, not at offer, so a letter issued well before your purchase contract can run short before you close.

What a refresh usually involves

Updating a preapproval is usually far quicker than the first one. Expect to send:

• your most recent pay stubs;
• your latest bank and investment statements;
• updated explanations for any new large deposits; and
• consent for a new credit report if the old one will be too old.

If your income or debts have changed, the lender reruns your numbers, and the amount on the letter may go up or down.

Credit checks on renewal

A new credit pull adds an inquiry. The CFPB explains that a mortgage lender checks your credit as part of reviewing your application, and score models generally treat several mortgage inquiries in a short window as one. If you are renewing with the same lender within a few months, ask whether a new pull is needed now or only closer to closing.

Keeping a long search on track

• Ask your lender at the start how long its letters last and what triggers an update.
• Use letters that state a specific amount for each offer, and ask for one tailored to the price you are offering.
• Avoid new credit, big purchases and job changes during the search; they can change the letter.
• Keep digital copies of each new statement so updates take minutes.

Sellers notice dates

Listing agents read dates. A letter issued months ago may raise questions about whether your situation has changed. A fresh letter dated within the last few weeks, matching your offer price, can make your offer look more reliable.

The bottom line

Preapproval letters expire because the documents behind them do. FHA generally limits documents to 120 days at disbursement, and Fannie Mae limits credit documents to four months at the note date. Track your document dates, refresh early and get an updated letter before each offer if yours is aging.