Getting pre-approved for a mortgage is one of the first steps to take if you’re considering purchasing a home. In fact, it would be wise to do this even before hiring a real estate agent or searching the market for houses.
Pre-approval entails giving mortgage lenders information about your finances in exchange for a loan offer that includes your potential interest rate and the maximum amount you can borrow. Pre-approval isnt an absolute guarantee you will get a loan. But it does mean that, provided your financial situation doesn’t change and the house you buy is valuable enough to serve as collateral, you’ll probably get one at the terms agreed upon.
Although pre-approval can be time-consuming and seem like a hassle, if you go through the process, you’ll gain these three significant advantages.
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by Christy Bieber | Published on Oct. 20, 2021
Before beginning your search for a home, get pre-approved for a mortgage.
Getting pre-approved for a mortgage is one of the first steps to take if you’re considering purchasing a home. In fact, it would be wise to do this even before hiring a real estate agent or searching the market for houses.
Pre-approval entails giving mortgage lenders information about your finances in exchange for a loan offer that includes your potential interest rate and the maximum amount you can borrow. Pre-approval isnt an absolute guarantee you will get a loan. But it does mean that, provided your financial situation doesn’t change and the house you buy is valuable enough to serve as collateral, you’ll probably get one at the terms agreed upon.
Although pre-approval can be time-consuming and seem like a hassle, if you go through the process, you’ll gain these three significant advantages.
You won’t waste time looking for homes in the wrong price range
Mortgage pre-approval establishes a maximum amount you may borrow. Although you may not want to borrow the maximum amount permitted by the bank, you must not borrow more than the bank has approved.
If you don’t know what your price range is, you might waste a lot of time looking at homes that are out of your price range. This could result in you wasting hours on a pointless search, but it could also make it more challenging to find a home you love within your price range because you might become fixated on features that are not within your means.
You’re more likely to get an offer accepted
The home sellers will typically request proof of pre-approval when you find a house you want to buy and submit an offer. This is so they can ensure you can obtain the loan needed to complete the purchase, which is in their best interests.
You don’t want to find a home you love and then have to start looking for a bank to make you a loan because pre-approval takes time and the market is so competitive. This could result in you losing the chance to submit an offer because you were unable to obtain your pre-approval letter in a timely manner.
If you submit an offer without a pre-approval letter, the seller might reject it because they doubt that you will be able to obtain the loan you need to purchase the property.
It will be faster to close on a home
It’s likely that once you find the ideal home, you’ll want to move in as soon as possible. Additionally, if you don’t have a pre-approval, you might find that your timeline is slowed down because it can take a while to get approved for a mortgage and complete the closing process.
Instead of starting from scratch, you will only need to go through the final approval process if you have already found a lender and submitted your financial information. This could expedite and simplify the process of making your purchase. Additionally, sellers will value this, and a quicker closing date might also improve your loan approval chances.
Pre-approval speeds up and simplifies the home-buying process, increasing the likelihood that your offer will be accepted. There is therefore no excuse not to speak with a lender and obtain pre-approval before you begin your search for a home.
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FAQ
What’s the primary benefit of being prequalify for a mortgage?
When you are prepared to submit an offer on a home, getting preapproved is a wise move to make. It demonstrates to sellers that you’re a serious home buyer and that you can obtain a mortgage, increasing the likelihood that you’ll actually buy the house.
Is it better to be preapproved or prequalified for a mortgage?
Paystubs, tax returns, and even your Social Security card may be required documentation for a preapproval. This means that a preapproval is a more reliable indicator of your ability to pay and lends more credence to your offer than a prequalification.
What is the benefit of pre-approval?
Sellers will take you more seriously as a buyer if you have a pre-approval letter in hand because you already know how much you can afford and that a lender is willing to loan you that amount.
Does being prequalified mean anything?
When someone is described as pre-qualified or pre-approved in a credit card offer, it typically means they have satisfied the initial requirements needed to become a cardholder. But they still need to apply and get approved. Consider these opportunities as requests to begin the actual application process.