WHY should you get pre-approved
for a mortgage
Shopping for a home before getting pre-approved for a mortgage is like walking into a store without a wallet. You may have the desire to buy, but you lack the ability. Let’s cover some basics…
What is a mortgage pre-approval?
A mortgage pre-approval is written assurance from a lender or broker that you’re able to borrow money to purchase a home up to a certain amount. It’s based on the underwriter reviewing your income, employment, asset documentation, and your credit history.
6 Reasons why.
1. Without it, most agents won’t work with you.
Makes sense, too. Right? Think about it: when you hire an agent, he/she will invest countless hours showing you homes over the course of your house hunt. If you were in their shoes, wouldn’t you want assurance that your hard work would lead to a favorable outcome for both you and your client?
2. You’ll know how much
house you can afford.
Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford. Knowing this narrows down the options and makes the selection process more efficient. Not to mention, it protects you from the unpleasant surprise of realizing the home you fell in love with doesn’t fit your budget.
3. It adds clout to
In many markets, homes attract more than one offer. If the sellers are weighing one offer against another, they may lean towards the one accompanied by a pre-approval letter. That’s because pre-approvals instill confidence that the buyer is financially capable of purchasing their home.
4. It could increase your negotiating power.
In addition to strengthening your offer when compared to buyers who haven’t taken this step, getting pre-approved may give you the upper-hand when negotiating the price. If the homeowner is eager to sell, they may be more willing to accept a lower offer from someone they’ve been assured is financially capable of purchasing their home.
5. It saves time.
Obtaining a mortgage can be a lengthy process. Getting fully pre-approved ahead of time shortens the time between getting into escrow to you getting the keys — this way you’re ready to proceed with finalizing the mortgage once you’ve found the home you want to purchase.
6. It carries more weight
than a “pre-qualification”.
A pre-approval differs from a pre-qualification. With the former, the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 30, 60 or 90 days). A pre-qualification is nothing more than a Loan Officer’s best guess of how much you can afford to spend on your home, so it’s a less accurate indicator of your ability to purchase. A pre-approval always carries more weight.