Advantages of Getting Pre-Approved for a Mortgage Before Buying
If you’re seriously considering buying a home, the first thing you should do is get pre-approved for a mortgage loan. Before you hop on Trulia or Zillow or even drive by a house, make sure you get pre-approved for a mortgage. While getting pre-approved for a mortgage may seem like a daunting task, putting it off can lead to costly problems down the road.
Difference Between pre-Approved and pre-Qualified
To begin, it’s important to also understand the difference between being pre-approved and pre-qualified. Getting pre-qualified helps borrows see how much they might be qualified to borrow. Pre-qualification is based on information the borrow provides to the lenders and a soft credit check.
By contrast, a pre-approval is determined after the completion of an extensive review of the borrower’s financial history and a hard credit check. The assembling of financial records is often what scares people about the process and why many put it off. However, if you’re worried about the state of your finances, getting pre-approved can actually help you out.
The paper work submitted to lenders gives a very clear picture of your financial situation. As such, any problems can be easily identified and your lender can give you advice on how best to rectify them.
Pre-Approval Sets your Price Range
Often people looking to buy a house get lost in prices. Knowing what you can afford is important to know ahead of time. Getting pre-approved determines you price range. Different lenders have different policies which will lead to varying approval numbers. For that reason, it’s good to apply to multiple lenders and go with the best number. Once you have your number, then you can begin looking for home sin your price range. Think of your pre-approval amount as your maximum price. Nothing is worse than shopping for houses and falling in love with a property, only to discover it’s way out of your range.
Getting pre-approved speeds up the buying process
One advantage to getting pre-approved early in the process, is that it speeds up the remaining parts of the process. If a buyer is looking in a hyper competitive market, they’ll need to be able to produce an offer right away after looking at a property. Not being pre-approved beforehand could delay your ability to make offer, causing you to miss out on your dream home.
Having a pre-approval makes your offer stronger as it establishes you as a serious home buyer. For properties with multiple offers, those with pre-approval will be given priority. Given the amount of paperwork, getting pre-approved is a complicated process that takes time. That’s another reason why it’s best to get pre-approved right away rather than wait.
Getting pre-approved for a mortgages
Once you make the decision to begin looking for homes, getting pre-approved requires a lot of paperwork. The documents that must be submitted to your lender include: 30 days worth of pay stubs, two years of W-2s or tax returns, and quarterly account statements for all your assets. From there you’ll need to request your credit report. Before submitting everything, look over your credit report and make sure everything checks out. After that, go over your budget and determine what you can afford as far as monthly mortgage payments go. From there, shop around for lenders. Ask your friends and neighbors who they went with. Take your time and apply to multiple lenders to ensure you’re getting the lest loan.