Let’s face it, shopping for a home before getting pre-approved for a mortgage is like walking into a grocery store without a wallet. You may have the desire to buy, but you lack the ability. Mortgage pre-approval is basically a promise from the lender that you’re qualified to borrow up to a certain amount of money at a specific interest rate, subject to a property appraisal and other requirements.
What does mortgage pre-approval mean?
If you’re granted a pre-approved mortgage loan, the lender gives you a pre-approval letter, which says your loan will be approved once you make a purchase offer on a home, and submit the following documents: the purchase contract, preliminary title information, appraisal, and your income and asset documentation. Keep in mind, though, that pre-approval does not completely guarantee your loan will be approved and is generally only valid for 60-90 days (but this varies and should be verified by your lender).
You’ll know how much house you can afford.
Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford. Knowing this narrows down the options and makes the selection process more efficient. Not to mention, it protects you from the unpleasant surprise of realizing the home you fell in love with doesn’t fit your budget.
It adds clout to your offer.
In many markets, homes attract more than one offer. If the sellers are weighing one offer against another, they may lean towards the one accompanied by a pre-approval letter. That’s because pre-approvals instill confidence that the buyer is financially capable of purchasing their home.
It could increase your negotiating power.
In addition to strengthening your offer when compared to buyers who haven’t taken this step, getting pre-approved may give you the upper-hand when negotiating the price. If the homeowner is eager to sell, they may be more willing to accept a lower offer from someone they’ve been assured is financially capable of purchasing their home.
It saves time.
Obtaining a mortgage is a lengthy process. Getting pre-approved ahead of time shortens the time between contract to close — this way you’re ready to proceed with finalizing the mortgage once you’ve found the home you want to purchase.
Today, getting the financing for a property can be pretty involved, especially in the current heavily regulated mortgage market. Of course, the first mortgage can be one of the toughest, so be sure to ask your loan officer about any special programs, such as VA or FHA loans, that are currently being offered as well. Whether you’re brand-new or just new to the current market, it’s time well spent if you’re looking at where you are now and what you may need to do to prepare. Talk to the mortgage team at the credit union about your options and get pre-approved today!
Happy house hunting!