Don’t Underestimate the Power of a Mortgage Pre-Approval

While the thought of shopping around for a home and popping into open houses might be pleasant, the actual starting point for serious homebuyers should begin at a lender’s office. Not only can potential buyers benefit in a number of ways by getting a pre-approval first, there are also a lot of headaches and disappointments that can be avoided.

Here are some reasons why a mortgage pre-approval is a must-have before the home buying process starts.

Find Out How Much You Can Afford

Why bother browsing homes that are way out of your price range? All you’ll be doing is setting yourself up for a huge let-down after finding out the house you’ve fallen in love with is nowhere near what you can afford. Having a pre-approval for a mortgage will give you a pretty good idea of the price range you should stick to when shopping around for the perfect home.

With the increase in restrictions in the mortgage industry these days, what you may have been qualified to borrow a few years ago might not exactly be the same today. Lower you level of anxiety and unpleasant loan surprises by getting pre-approved for a mortgage.

Beat Out the Competition

Depending on where you plan on buying a home, you might be dealing with a host of other buyers looking in the same neighborhood, and even at the same house. It’s not uncommon for homes in desirable areas to experience multiple offer situations where bidding wars can get crazy. By having all your ducks in a row with a pre-approved mortgage, you’ll have a better chance during the offer process. Without one, you pretty much have a slim chance of your offer getting accepted if there are other better-prepared buyers vying for the home you want.

Sellers also prefer dealing only with home buyers that are actually able to be secured for a loan before they accept an offer. It’s nothing but a headache and a waste of time for a seller to hand over the keys, only to have the deal fall through because the buyer wasn’t able to secure a mortgage.

Jump on a Listing Quicker in a Fast Market

Thanks to the internet, buyers are able to see new listings the second they pop up on the market. This isn’t the 80’s – there’s no need to wait around for a phone call or even a fax notification from realtors about a new listing. Buying and selling transactions are also just as fast.

Without a pre-approval for a mortgage handy when putting in an offer on a home, the sellers will consider this a risk as they sit around for days waiting to see if financing will be approved for a buyer. In the meantime, they could have been entertaining other offers from pre-approved buyers. If you show the sellers that you’ve already handled the financing, you’ve essentially gotten rid of one major obstacle for the seller which will paint you in a better light.

Save a Ton of Time

There’s a bunch of work involved in approving a borrower for a mortgage. Lenders have to complete a series of tasks, including credit checks, confirmation of income, and so forth. All of this takes time, sometimes weeks. Rather than having to do this after you’ve found the home of your dreams and signed a purchase agreement, you can save yourself a lot of time after the fact.

As long as there aren’t any major changes that happen in your financial life from the time you get pre-approved to the time of escrow, things can move along a lot quicker. You’ve already gotten the OK from your bank, now it’s just a matter of collecting any information your lender needs to complete the transaction.

The Bottom Line

While a pre-approval for a mortgage isn’t exactly a 100% guarantee that a loan for a specific property will definitely be secured, it still puts you one step closer to becoming a home owner. You’ll look more attractive to sellers, and you can speed up the closing by simply taking that initial step to have your finances verified by your lender before the home buying process even begins.