Are you considering buying a home? If so, you are joining a group of more than 6.3 million people in the U.S. who are planning to do this in 2018.
However, before you begin looking for a real estate agent and visiting potential properties, there’s something else you need to do – get pre-approved for a mortgage.
Not sure this is necessary? Consider the benefits of getting pre-approved for a mortgage here.
What Does Mortgage Pre-Approval Mean?
Before diving into the benefits of mortgage pre-approval, it’s wise to better understand what this means.
A mortgage pre-approval is something you receive from a mortgage lender that states you have been approved for a mortgage prior to selecting a specific property. When you go through this process, you’ll fill out a loan application and provide the lender with documentation about your income.
The lender will also pull your credit report and determine how credit worthy you are. You will do everything that you would if you were getting a traditional mortgage.
You can even begin learning about a 15-Year vs 30-Year Mortgage, and thinking about which option works best for you, although this is a decision you can make at a later date.
You will then receive a notification of being pre-approved and find out how much you are approved for. Once you have that, you can begin shopping.
Now that you understand what pre-approval means, you can dive into the benefits it offers.
You Know Your Budget
One of the biggest advantages of pre-approval is that you get to know what your budget is. With mortgage pre-approval you know exactly what you have been approved to borrow.
As a result, you also know how much your mortgage payment is going to be. There are quite a few people who spend time looking at properties that they could never be approved for.
This is a waste of time and can be quite disappointing. If you get pre-approved, you won’t have to worry about this.
Increase Your Negotiating Power
Another advantage of mortgage pre-approval is that it will enhance your negotiating power. When you begin looking for properties, sellers and real estate agents will give you special treatment. If you wind up making an offer, yours will jump ahead of others.
If a buyer isn’t pre-approved, then it means uncertainty for a seller. As a result, many sellers will accept your offer, over higher ones, simply because you have secured the mortgage.
Fastrack To And Through The Closing
When your offer is accepted, and you are under contract for a house, being pre-approved for a mortgage can help to speed up the closing process. After all, your information will already be with the lender, which means all they have to do is finalize everything.
This makes it easier to get in your new home, faster.
No one wants unexpected surprises when trying to buy a house. If you find the house first and then discover you can’t get financing, it can be quite disappointing. With pre-approval, this is a non-issue.
As mentioned before, you know what you’re approved for, and the lender already has your information. As a result, the possibility of unpleasant surprises is virtually eliminated.
Are you ready to buy a home? If so, don’t start looking just yet. Instead, get pre-approved. In the long run, this will help you save quite a bit of stress and frustration.
The majority of lenders offer pre-approval, so be sure to shop around for the best value. This will help ensure you get a mortgage you can afford.
Hi, my name is Jon and I run Compounding Pennies. I’ve been interested in personal finance since high school and love writing and talking about it. You can learn more about me in the Authors section of this site.