Those needing to obtain a mortgage sometime in the next few months should take an important preliminary step before they do anything else. Read on to find out why a mortgage pre-approval is so important for those about to buy their first home.
What is a Pre-approval?
Beginning your home search without a pre-approval is only doing things halfway. Pre-approval applications are offered by lenders so that buyers can see how much house they can afford and more. It involves filling out a form with some of the same information that will be required when you apply for a mortgage (so, it's like a practice session). The application is evaluated by a lender, and you are given a price range determined by your income, credit score, and more. The lender will be checking your credit as part of the pre-approval process but other things like your employment are not confirmed at this point. Here is the valuable information a lending pre-approval will tell buyers:
Your Price Range
It's important for buyers to zero in on homes at prices that they can expect to be approved for and that is the most valuable thing pre-approvals can tell them. While it's certainly not a guarantee of an eventual approval, it does indicate a good chance of approval. Rather than wasting time on homes that don't meet your expectations or that are well out of your price range, you can concentrate on those that are just right for you. It also provides you with what you need to know about down payments. If the home you want is more than the lender determined you could afford, a down payment could make that home possible regardless.
Get Actionable Information
You may not be entirely happy with the results of your pre-approval but it's still valuable information to have about the state of your financial situation. Knowing about credit problems now provides you with an opportunity to make changes now rather than being disappointed after applying for a mortgage. For example, if your credit could use some work, you now have time to improve your score by paying down debts.
Impress the Seller
Sellers prefer seeing buyers who are prepared to go through with the transaction. Pre-approved buyers tend to be more successful with their mortgage applications because they already know what could happen. That could make a huge difference to a seller that is considering two similar offers on their home.
Speak to a mortgage lender to find out more.Share