Reasons to Get Pre-Approved
Most real estate professionals and lenders recommend the first step for homebuyers in the search for your dream home is getting pre-approved for a mortgage. This way you will have the best information about the right price range for your pocketbook. Many sellers want to see that you're are pre-approved when making an offer; as this means that you are closer to having the cash to purchase their property.
Through this pre-approval process, a mortgage lender or broker will review your qualifying criteria (credit score, income, debt, etc.) to determine how much they can loan you.
When you get pre-approved for a mortgage loan, you are essentially finding out how much a certain lender is willing to loan you. Pre-approval goes a step further than pre-qualification, which is just a basic review of your finances. Through this process, a lender will review your finances in greater detail and will pre-approve you for a certain amount.
Being pre-approved for a home loan will make the process go faster and helps save you a lot of time and money. For one thing, it shows the sellers that you are a serious buyer and you're capable of buying their home. This can give you a leg up during the offer process, especially when multiple buyers are competing for the house. When you've been pre-approved by a mortgage lender, it's the next best thing to having the money in hand.
- You can determine which loan program best fits your need and which programs you qualify for.
- You will know exactly how much you are qualified for. It's no fun to find your "ideal home" and then find out you cannot afford it.
- Your monthly payment will be set. This will allow you to budget your money before making this large investment.
- It shows you what the down payment and closing costs will be.
- It shows sellers that you are ready, willing and able to buy their home. That puts you in an excellent negotiating position.
Note: If you are a first-time buyer, you may be able to qualify for a special first-time buyer program which may allow you to afford more home for your money.