Buyers getting ready for a fall purchase usually ask me about rates. The paperwork deadlines get less attention, and they are the part a buyer can actually control. Two federal disclosure rules and one credit-scoring convention put three clocks on the mortgage process, and each one exists to give you time before you sign anything.
What a preapproval actually checks
The CFPB is careful here: lenders use the two words differently, and the label alone does not tell you much about a lender’s process. What the CFPB does say is that some lenders offer a prequalification letter based on unverified information that you report, and will only issue a preapproval letter based on verified information. So the useful question is not which word is on the letter, it is what the lender actually verified. When a listing draws several offers, that is the answer worth having in hand.
Clock one: the Loan Estimate
Apply with a lender and they must provide a Loan Estimate within three business days of receiving your application. It is a standardized three-page form covering the rate, projected payments and closing costs. Because every lender uses the same form, you can hold two of them side by side and see where the numbers differ, so it is worth asking for more than one.
Clock two: the 45-day shopping window
The CFPB notes that within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry, counted from the first credit check. So three lenders inside 45 days show up on the report the same as one. Gather the estimates while the window is open.
Clock three: the Closing Disclosure
The Closing Disclosure is a five-page form with the final loan terms, projected monthly payments and closing costs, and the lender is required to give it to you at least three business days before you close. Read it against your Loan Estimate and ask about any number that changed. Buying around Greater Boston this fall and want a second set of eyes on the paperwork order? Send the Loan Estimate over and I will read it with you. Diana Kim, REALTOR®, eXp Realty.
Questions
Common questions
How fast does a lender have to send a Loan Estimate?
Within three business days of receiving your application, per the CFPB. All lenders are required to use the same standard three-page Loan Estimate form, so estimates from different lenders can be held side by side.
Does shopping multiple mortgage lenders hurt my credit score?
The CFPB notes that within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry, so gathering several quotes inside the window is treated as one shopping event.
What is the difference between prequalified and preapproved?
Per the CFPB, lenders use the two terms differently, and some lenders offer a prequalification letter based on unverified information you report while issuing a preapproval letter only on verified information. The CFPB's advice is not to read too much into the word, so ask the lender what they verified.
Sources
- CFPB: a Loan Estimate is a three-page form that you receive after applying for a mortgage; the lender must provide it within three business days of receiving your application
- CFPB: within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry
- CFPB: a Closing Disclosure is a five-page form that provides final details about the mortgage loan, including loan terms, projected monthly payments and closing costs; the lender is required to give it to you at least three business days before you close
- CFPB: some lenders offer a prequalification letter based on unverified information that you report, and will only issue a preapproval letter based on verified information
Written by Diana Yeji Kim — REALTOR® at eXp Realty, serving Greater Boston in English, Korean, and Japanese.
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