- If you're ready to become a homeowner, you'll likely need to get a mortgage.
- You should get pre-approved for your home loan as the first step toward purchasing a property.
- Pre-approval helps ensure you can buy the right property and maximize your chances of getting your offer accepted.
Taking this step can make home-buying a lot easier.
When you decide that you are interested in buying a home, there's one key step you need to take before you begin shopping for properties -- and especially before you make an offer to buy one.
What does mortgage pre-approval mean?
Getting pre-approved for a mortgage involves submitting your financial information to a mortgage lender that you wish to get your home loan from. This includes details about your credit, your income, and your debts.
The mortgage lender will review your credentials and decide how much you should be allowed to borrow and what rate you will be offered. You will not necessarily be guaranteed financing since your financial situation could change before final approval, or issues could arise such as your home not appraising for enough.
But, when you get pre-approved, it means you should be able to get the promised loan at the specified rate as long as all goes well.
Here's why getting pre-approved for a mortgage is so important
Mortgage pre-approval is a key first step to becoming a homeowner for a few important reasons.
First and foremost, pre-approval allows you to make sure you can get affordable financing. You'll be able to find out how much the bank is willing to lend you so you can plan accordingly when you set your home-buying budget. You will also be able to get an estimate of what your home loan will cost each month, so you can decide if the amount fits in your budget or if you need to scale down and buy a cheaper house with a more affordable mortgage.
In addition to helping you determine your price range for your property search, mortgage pre-approval has another big benefit. After you have been pre-approved, your mortgage lender will write you a pre-approval letter. You'll typically need to include proof that you have been pre-approved when you make an offer to buy a home.
If you don't include a pre-approval letter, then potential home sellers may not have the confidence you can actually afford to follow through with buying the property. As a result, they're likely to pass over your offer -- especially if they have multiple interested buyers and others provide proof of financing.
Finally, by getting pre-approved, you'll be able to close more quickly after your offer has been accepted. This can also make you a more attractive buyer, and it can help you better plan for when your new home will officially become yours.
For all of these reasons, you should start working on getting pre-approved as soon as you decide you're ready to buy a home. This process can take time, and you want to be ready when you find the property of your dreams.
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