If you are in the market for a new home, getting pre-approved for your mortgage is one of the first steps you must take. In fact, a mortgage pre-approval should be obtained even before you start your home search.
What Pre-Approval Means
A pre-approval is not the same as getting pre-qualified for a mortgage loan. Pre-approval involves approaching a mortgage lender and asking for approval to obtain a mortgage in the future. The mortgage lender will look at your credit score, employment history and current financial situation and use that information to determine the amount you can borrow for your home purchase. If you are approved, you will receive a pre-approval letter that can be used as a bargaining chip when you buy your home. Sellers love to see a buyer who has been pre-approved already, as it shows that the buyer is serious and has come prepared with financing to buy the home.
What to Do After Receiving a Mortgage Preapproval
Once you receive your mortgage pre-approval letter, it’s time to start shopping. You can begin browsing for homes online to see what type of property will fit your pre-approved budget as well as your needs.
With a mortgage pre-approval letter in your back pocket, you now know what you can afford to spend, how aggressive of an offer to make and how stable your financial situation is for a home purchase. Now that you’ve narrowed down your options, you can have a better idea of which homes to look at. To get an even clearer understanding of what homes are available to you, reach out to a Better Homes and Gardens real estate agent who has both the experience and the market knowledge to help you find the home of your dreams.
When you find a home you like, you can use the mortgage pre-approval letter as a bargaining tool. When you decide to make an offer on a home, make sure the seller knows that it is an offer with a preapproved loan behind it. This will increase the chances that the offer will be accepted. In fact, some sellers will accept a lower bid from someone with a pre-approval letter over a higher bid from someone without one.
Does a Pre-Approval Letter Last Forever?
Pre-approval for home loans is not an infinite tool. Lenders are well aware of the fact that your financial situation can and will change with time. Check the letter to see how long the pre-approval will last.
Also, remember that a pre-approval is not a guarantee of the loan. It means that you are approved to get a loan, unless something changes. The lender will ask more questions when you are ready to actually buy a home, and many factors, including the appraised value of the home, any title problems on the property and any changes to your financial situation, will be considered before you are actually granted the loan. With that said, unless your circumstances are unique, most pre-approvals turn into loans once your offer is accepted.
For more information about the home buying process, reach out to me!