Getting mortgage pre-approval is one of the best investments of your time that you can make when setting out to buy a home. Pre-approval means a lender has agreed to provide you with a loan to buy a home. It’s a process that involves numerous steps, including verifying your income, expenses, and overall qualifications.
When you have a pre-approved mortgage, you’re on your way to buying a home. Most of the time, it’s the preferred first step in the process, even before you start looking for homes to purchase. Why should getting pre-approved for a mortgage be so important to you? Here are five reasons you should consider.
1. You Become a Buyer with Leverage
With pre-approval, a lender has stated they will loan to you as long as conditions don’t change. That’s important to home sellers. If a buyer places an offer on their home, they want to know that it’s a serious offer and that they can consider it. Having mortgage pre-approval means the seller can recognize you’re qualified to make an offer — you’re ready to negotiate.
As a buyer, having pre-approval like this makes your offer more powerful. It’s more confident and secure. Sellers, who may have multiple offers on their home, are more likely to choose the buyer who looks to have a loan ready to go and can expedite the process.
2. You Know Exactly What You Can Afford
Getting pre-approved for a mortgage before you head out to start looking for a home to purchase is critical for your own benefit.. It isn’t until you’ve worked through the pre-approval process that you’ll understand how much you qualify to borrow.
Let’s say you find a home that’s priced around $400,000 that you simply love. Yet, your lender cannot offer more than $300,000 to you. That leaves a significant gap. Save yourself the frustration and ensure you know how much you’re qualified to borrow before you start looking at homes to purchase.
3. Lock in the Best Mortgage Rate
Working with a mortgage broker through the pre-approval process also means you’ll be able to lock in the interest rate that is available to you. Since interest rates are increasing in many areas, you’ll want to lock in the lowest rate possible before that occurs. With pre-approval, you can do just that.
A mortgage broker will give you insight into how long you can lock in the rate for and what to expect going forward. They can also give you some insight into what to expect from mortgage rates in the coming months. Your mortgage lender will work closely (and quickly) with you to ensure you get the best rates available to you at the time. Swift action means you’ll be protected from interest rate increases.
4. Minimize the Risk of Problems Later
The goal of pre-approval is to make sure you qualify for a loan. There could be many things that limit that process. For example, you may need to obtain tax records to prove your income, or you may have some judgment on your credit report that needs to be taken care of before you can move forward with the loan (that could mean it’s impacting your credit score, for example). When you work with a mortgage broker early on, they will catch these potential hang-ups, giving you ample time to deal with them.
This means that once you are in the process of getting mortgage pre-approval, you know with confidence you can move forward with the home purchase. That can save you hassles later in the homebuying process. With some sellers putting timeline contingencies in place, you’ll want to be sure you don’t run into preventable delays and obstacles.
5. It Saves You Time on Closing
Once you find your dream home, place an offer on it, and get it accepted, you will find that the longest period of your life (it seems) is the closing period. There are a lot of steps for the underwriters and your mortgage broker to take. There are also steps you can take on your end to speed up the closing process. You don’t want to slow it down in any way. When you have a pre-approved mortgage, the process is a bit different.
The mortgage broker does not have to find all of the information and get you qualified. That’s already done. They just need to go back and double-check the accuracy of everything and ensure your finances remain in order. This results in the closing process taking much less time. The sooner you close, the faster you can move into your new home.
How Can You Get Mortgage Pre-Approval?
Getting pre-approved for a mortgage does not have to be complex. Work with a mortgage broker by providing all of the information they request. This typically includes:
- W-2 statements
- Bank statements
- Credit reports
- Personal identification information
- Tax returns
- Reference letters
They will work to verify your qualifications and identification from that point. Within a short period, you’ll know that you qualify for a loan and how much you can borrow.
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