The Importance of Getting Pre-approved for a Mortgage
Getting approved for a mortgage is one of the most challenging aspects of buying a house. And the thought of going through the mortgage qualification process is enough to make people turn away from the home-buying process altogether.
But getting a pre-approval letter for a mortgage can help you.
Once you know you’re pre-approved, it can take a lot of burden off your shoulders. You now know if a lender will even consider giving you a mortgage or not. However, the benefits extend beyond that.
This article will discuss how a pre-approval mortgage can help you throughout the home-buying process.
Real Estate Sellers Know You’re Serious
Getting pre-approved for a mortgage can help you get a home faster. Once you obtain a pre-approval letter for a mortgage, sellers can see how serious you are about buying real estate.
And they might take your offer more seriously than offers from buyers who are not. A pre-approval letter for a mortgage proves that you can obtain financing and that your offer to buy is genuine.
You Know Your Budget Now
When you get pre-approved for a loan, it may be with conditions. Your pre-approval letter typically will include the loan amount, an expiration date, and a loan program. The letter is submitted with your offer.
And once you know your mortgage pre-approval amount, you know which homes you can afford and which work best within your budget.
Lets You Shop for Features, Not Price
When pre-approved for a mortgage, you know the maximum amount you qualify for. As such, you know your budget.
You can then shop for homes based on the features and amenities. That way, you’ll be able to find a house that suits your needs and interests. You’ll also be able to focus on homes in your budget. Doing so will enable you to be prepared to make an offer quickly.
Potentially Makes it Easier to Get a Mortgage
When a lender pre-qualifies you for a loan, it doesn’t mean you already have a mortgage. With pre-qualification, you supply the lender with an overview of your finances, income, and debts. The mortgage lender then provides you with an estimated loan amount.
Pre-approval involves a mortgage application and a hard check on your credit (e.g., credit report, credit score).
And since that lender has all your financial information, checked your credit, and verified the documentation, they are more likely to approve you for a mortgage.
Peace of Mind
It’s a lot less stressful on your part. Once you know you’re pre-approved for a mortgage, you have a better pathway to getting final loan approval.
Mortgage pre-approval takes time and organization. If you think you may have some challenges getting a mortgage, going through the pre-approval process will help root out potential credit issues. You’ll have time to address them.
It’s better to know 6-months to a year before you seriously search for a home. You can save money for a down payment or closing costs, and you will be able to improve your overall credit score.
Are There Some Ways You Can’t Approve after Getting Pre-approved?
There are more than a couple of credit-related roadblocks. Suppose you make any significant changes to your credit (such as eliminating a line of credit or opening a new line of credit). In that case, you could potentially harm your chances of getting approved for a loan. Why?
Most lenders consider qualifying you for a loan based on your debt-to-income ratio. And if that ratio changes in any way, they would have to reconsider you based on your new ratio.
Not paying your bills could also hinder your chances of getting a loan. Any late payments towards any line of credit make you lose credibility in the eyes of the lender.
Suppose you fail to disclose critical information such as a divorce, an I.R.S. tax lien, or some other issue that may impact your finances. In that case, you may not get final approval.
Bottomline: Get Pre-approved for a Mortgage Loan
It’s true. Getting a pre-approval letter for a mortgage gives you an advantage when making an offer to buy a home. It will also help you stay within budget.
If you’re starting to think about homeownership, then the pre-approval process is something you should consider doing. It will help you get your finances in shape and provide insight into your overall credit health.
Mortgage pre-approval is an essential step for home buyers. When the time is right, consulting with a lender and getting a pre-approval letter puts you in a better position as a buyer.
Mortgage Lending Discrimination is Illegal
If you think you have been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, you should report it. You can file a report with the Consumer Financial Protection Bureau (CFPB) or the Department of Housing and Urban Development (HUD).