If you're planning to buy a house, you might want to get pre-approved for a mortgage before you start house hunting. This can give you an edge over other buyers, show sellers that you're serious and ready, and help you avoid delays and surprises in the financing process. Here's how you can get pre-approved for a mortgage and what you need to know.
Pre-approval is a conditional commitment from a lender that they will lend you a certain amount of money for a home purchase, based on your income, credit, assets, and debt. It's not a guarantee, but it's a strong indication of your borrowing power and eligibility. Pre-approval usually lasts for 60 to 90 days, depending on the lender and the market conditions.
Getting pre-approved for a mortgage can benefit you in several ways. First, it can help you narrow down your home search by giving you a realistic budget and price range. Second, it can make you more attractive to sellers, who might prefer buyers who have secured financing over those who haven't. Third, it can speed up the closing process, since you already have most of the paperwork and verification done. Fourth, it can give you more confidence and peace of mind when making an offer, knowing that you can afford the home and have a lender backing you up.
As a Realtor you should know what a client is qualified to purchase before you take them out to view properties. It's critical for the client to understand their purchasing power & all the potential financing obligations of a mortgage. This is discussed in the pre-approval process with a Lender. Once they are pre-approved, clients are typically more confident & comfortable with shopping for a property. When submitting offers on properties, listing agents & sellers want assurances that the buyer can afford the purchase before they will accept the offer. That "assurance" (pre-approval) is typically required to be submitted with the offer. Also, getting pre-approved demonstrates intention & fore-thought which reflects positively on the buyer.
To get pre-approved for a mortgage, you need to contact a lender or a mortgage broker and fill out an application. You also need to provide some documents that prove your income, assets, credit, and debt, such as pay stubs, bank statements, tax returns, W-2 forms, and credit reports. The lender will review your information and check your credit score, and then give you a pre-approval letter that states the loan amount, interest rate, and terms that they are willing to offer you. You can compare different lenders and pre-approval offers to find the best deal for you.
After you get pre-approved for a mortgage, you can start house hunting with more confidence and clarity. You can use your pre-approval letter as a bargaining tool when making an offer, and show it to your real estate agent, who can help you find homes that match your criteria and budget. However, you should also keep in mind that pre-approval is not a final approval, and it can change or expire depending on various factors, such as your income, credit, debt, appraisal, inspection, or market conditions. Therefore, you should avoid making any major financial changes or decisions that could affect your pre-approval status, such as changing jobs, taking on new debt, or making large purchases. You should also stay in touch with your lender and update them on any changes in your situation or preferences. Finally, you should be ready to submit your final loan application and documents once you find the home of your dreams and have an accepted offer.
Getting pre-approved for a mortgage can be a smooth and rewarding process, but it is important to be aware of the potential mistakes that buyers make. These include not getting pre-approved at all or waiting too long, getting pre-approved for more or less than they need, only getting pre-approved by one lender, assuming pre-approval is a guarantee, making changes to their financial situation or behavior, or not disclosing relevant information. Avoiding these pitfalls can help make the most of your pre-approval and ensure a successful home buying journey.