There are several key points associated with pre-approvals, including the following:
Credit score impact: Applying for pre-approval can result in a hard inquiry on your credit report, which can temporarily lower your credit score.
Rate lock expiration: Pre-approval often comes with a rate lock, which guarantees a certain interest rate for a specific period of time. If the loan does not close within that time frame, the rate may expire and you may have to re-apply for pre-approval at a higher rate.
Property not meeting requirements: Pre-approval is based on the information provided at the time of application. If the property does not meet the lender’s requirements, such as appraising for less than the purchase price, the loan may not be approved.
Changes in financial situation: Your financial situation can change after pre-approval, such as losing your job or incurring additional debt. This may impact your ability to qualify for the loan.
Pre-approval is not a guarantee of a loan: Pre-approval is not a guarantee that a loan will be approved, as the lender will still need to verify the information provided and complete a full underwriting process.