The Importance Of Getting Pre-Approval
The day is here and the dream is within reach. You’re finally going to take that next step, finally ready to become a home owner. You’ve got pretty good credit, you’ve been steadily employed, and you’ve started looking at houses. One day, while checking out some potential homes, you find the one — the perfect home. You begin to make inquiries, you set appointments, and you start telling family and friends all about the new place you’ve found. Suddenly, a few days after you go apply for a mortgage, you find out that you cannot get approved for enough to buy your dream home.
This is a common scenario in the world of real estate sales. And this is why it is so important to find a Realtor® and then go sit down with a lending specialist to get pre-approved for a loan amount. This is a fairly simple process in which you bring in a few documents so that a lender can verify your employment, check your credit, etc. Now, this is not the same as what is known being pre-qualified, because loan pre-qualification usually doesn’t even involve documents, just a few quick questions, and you can have a very rough estimate of what loan amount you may qualify for.
However, pre-qualification doesn’t mean you are going to get that loan amount, or even be approved for a loan at all. That is why the full process of pre-approval is much more important. Pre-approval will let you know exactly how much you will qualify for and that offer usually lasts for a few months or more. And the reason a pre-approval offer from a lender is good for a few months is two-fold: First, they know you may need or want to shop around for a home, and it’s always smarter to wait for pre-approval before doing that. Second, after a few months, your employment status could change or your credit score could change, meaning you might not qualify for a loan anymore — or you might qualify for an even better deal.
You should know, before even attempting to look at homes, that many sellers who have a Realtor® representing them won’t even discuss a sale with you until you have a pre-approval letter in hand. This is because no seller wants to see their home tied up for months over a deal that may not even be possible to begin with. Looking at properties without pre-approval for a loan amount is, at best, a waste of your time, and at worst, the cause of a lot of frustration and disappointment. All of that could be avoided by simply finding out the amount of funding you might qualify for, thus, allowing you to look at homes and property within the right price range. Now, of course, you don’t want to look at homes selling for the same amount you are approved for, as you also need to consider things like property insurance, taxes, etc. But not buying a house for your fully approved amount is worth a whole post all by itself.
Finally, getting pre-approved for a certain loan amount is no actual guarantee that you will really get that amount. As stated above, your work or credit circumstances could change at any time after you’ve been pre-approved. Plus, there are things for the lender to consider, such as getting the property appraised to make sure it really is worth the amount they might loan you. That may sound a bit strange, but remember that the property you may buy is usually the biggest form of collateral that the lender has in case you default on your loan. So, they want to make sure that if you stop paying back the mortgage loan, they are going to be able to get their money back somehow. Also, sometimes you cannot get fully approved for a loan until you’ve shown that you have some sort of property or house insurance coverage already. But that is something a lending specialist can tell you more about or if it’s even needed.
Finding a licensed professional to work with you during the buying process is so important because of all the time and frustration you can save by working with them. A Realtor® will help you through all of these first steps so that you can get out there and begin looking for your dream home with ease and confidence.
