Why It Is So Important To Get Pre-Approved For A Mortgage Before House Hunting
Whether this is your first home, or you are an experienced home buyer, getting pre-approved by your lender is one of the first steps to take in the buying process. Before you fall in love with your dream home and later realize it is not within your budget, you need to know what you can afford. Mortgage pre-approval is based on several factors that include your financial profile, your income, bank balances, debts, and investment accounts. When you get pre-approved for a mortgage, you find out the maximum amount you can spend on a home, the monthly mortgage payment associated with your maximum purchase price and what your mortgage rate would be for your first mortgage term. Reasons that make pre-approval more beneficial are listed below.
Enables You to Move Quickly
These days, during a seller’s market, the competition for buyers is huge and you need to be prepared. To be competitive as a buyer, you need to ensure that you are ready to submit your offer as soon as you find the house that you want. In a situation where a home has multiple bids, those offers with attached mortgage pre-approvals will always be given precedence over others.
Pre-approval allows you to move more swiftly after finding your dream home. There will be no paperwork and forms to fill out and it will take your lender much less time to process your mortgage. Keep in mind that getting a pre-approval does not happen overnight. Since your lender needs to verify all of your financial information, this process can take a few days to even a few weeks to complete – depending on your finances. That is why it is best to get it out of the way at the beginning so you are truly ready when the time comes to make a move.
Getting a pre-approval before you start house hunting can prevent a lot of wasted time on your behalf as well as the seller’s. If you sign a purchase contract only to later discover that the lender will not finance what is needed, or that the terms given by the bank are unacceptable to you, you will need to start back at square one.
Sellers want to consider offers that are the most likely to close successfully. The last thing any seller wants is for a prospective deal to fall through at the last minute because the buyer had no mortgage approval. That would mean starting the selling process again from the beginning. Some sellers will even accept a lower offer if they know the buyers have a mortgage pre-approval as it is more likely to have a successful close.
Helps Your Agent Work for You
Your real estate agent will encourage you to get pre-approved so they can best serve you. They will use your pre-approval to negotiate the best terms possible for you at the negotiating table. With your pre-approval in hand, they can use their stellar reputation to ensure the seller and their agent that you are a serious and prepared buyer with the means to get the deal closed.
Other great Reasons to Apply Now
It doesn’t cost anything to apply! Also, once you are approved, your pre-approval usually stands for 60, 90 or 120 days depending on your lender. You will have time to find a home with a locked in mortgage rate that will not go up, even if rates rise.
The Bottom Line
If you are serious about buying a home, applying for a pre-approved mortgage will likely save you a lot of stress, time, and frustration down the road. Although you can’t trump a cash offer, having a mortgage in place will place you in great stead and get you to the top of the list when submitting an offer on your dream home!