If you’re serious about buying a home, getting pre-approved for a mortgage really is the first step that you should take. Of course, this can often feel a little intimidating if you’re a first-time homebuyer. Getting pre-approved does take a fair amount of work but it’s really important that you don’t end up shuffling this task to the end of your to-do list! We’re going to take a closer look at why you should get pre-approved before hitting the market.
Resolving Financial Issues
First things first, it’s important to understand what a pre-approval is. Pre-approvals are issued after your lender performs a thorough review of your financial records or “hard credit pull”. It is for this reason that many sellers will request you have a pre-approval letter because the amount listed on your letter will more accurately reflect your purchasing power.
Now, some may be reading this and feeling a little nervous about the whole process; which is understandable. However, the good news is that no matter how messy your financial situation may be, getting a pre-approval can actually help you get it on track! Since the paperwork required to get pre-approved gives lenders a thorough understanding of your finances, they can find the root cause of any issues and give you advice on how best to tackle them.
Also, even if you apply for a pre-approval, and find out that you’re not quite ready to buy in your desired price range just yet, it’s much better to learn that before you start shopping. Simply take some time and work towards additional savings, and you should be in a much different position.
Defining Your Search
Once you go through the process of getting a pre-approved loan, that amount will essentially determine your price range for a new home. When you have your letter in hand, you can use that number to determine which properties are a good fit for you to see. As a note, a particular institution will agree to lend you a certain amount based on their own internal policies. With this in mind, some people recommend applying with a few different lenders to get a sense of how much you can realistically afford.
Try to view your pre-approval amount as your maximum amount for the new place. This will avoid the unfortunate situation of falling in love with a dream home, only to realize that it’s entirely out of your budget.
Helps You Move Quickly
These days, houses can go off the market fast! In order to be competitive, you need to make sure you’re ready to submit an offer as soon as you’ve found a home you love. Coming with a pre-approval in hand is a huge part of making a strong offer. The seller will see that you’ve taken the time to have a lender vet your finances, letting them know that you’re a serious buyer.
In fact, in competitive markets, many sellers won’t even consider an offer without mortgage pre-approval. Also, if you find yourself in a multiple offer situation, offers with pre-approvals attached are nearly always given precedence over ones that just have a pre-qualification. Keep in mind that getting a pre-approval doesn’t happen overnight! Your lender needs to verify all of your financial information, which can take anywhere from a day to a few weeks. Getting it done ahead of time makes sure you’re truly ready when the time comes to make a move.
Getting pre-approved for a mortgage helps to make sure you’re fully prepared to go out and look for a new home. It helps you get things in order, lets you know where to look, and makes sure you’re ready to make a solid offer when you’re ready to make the move! All you have to do now is research and pick a few of the best lenders in your area in order to find the best one for you. Be sure to follow Mosaik Homes’ blog series for more even more helpful information!