If you’re just starting with the home-buying process, you may want to get a mortgage pre-approval. This is a statement from a lender that informs you of a certain amount you are qualified to borrow, as well as a specific pre-approved interest rate. Not only will this help you, but to sellers and agents as well. Here are four real reasons why you should get a mortgage pre-approval before you start your home search.
Understand Your Realistic Budget
Arguably the most important factor when buying a home will be the cost. It is important to know the cost of a home and the cost of agent fees, repairs, inspections, and more. With a mortgage pre-approval, you can set educated limits and budgets to ensure that any home you may be interested in will be one you can afford.
Become a More Attractive Buyer
For sellers, especially in a seller’s market, finding a buyer with a mortgage pre-approval is advantageous. Buyers with pre-approvals are at a lower risk of falling through on the purchase due to a lack of financing. If you put an offer in on a home with a pre-approval, and another buyer without pre-approval also puts in an offer, you will be more likely to be approved and move forward through this part of the process.
Find Room to Negotiate
Because a pre-approval makes you more attractive to sellers, you may also be awarded some flexibility in negotiations. When a seller is sure a buyer has been qualified for the cost of their offer, they may be more likely to make financial compromises, such as closing costs, repairs and improvements, if it means the sale is guaranteed.
Speed Up the Closing Process
During the process of closing, mortgage approval plays a part in time delays. With a mortgage pre-approval already done and financing secured, you can jump into the following steps: appraisal and inspections. If a seller wants to close quickly, something almost every buyer can hope for, having your finances pre-approved will benefit both parties involved.
Research lenders you’d like to work with. Compare rates and terms to determine which lender is right for you and help you find the right home. Avoid any major financial changes, such as opening a new credit card or applying for another loan, between applying and receiving your pre-approval. Please don’t rely on the number you receive, as it is only an estimate. Be conscientious and talk to your real estate agent and financial advisors for further advice, information and guidance throughout this process.