When shopping for a home, many sellers want to know that you can really afford their property before they will take your offer seriously. By getting pre-approved, you can go through the application process for a mortgage and have financing in place before you even start looking. This will help things move faster and smoother during the buying process.
Here are four important advantages you gain by getting pre-approved:
- 1. A pre-approval letter is more reliable than a pre-qualification letter.
Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information and then wait a few minutes for the letter to come through your fax machine. Getting a “pre-qual” from a Web site is just as easy. Enter some information, click “submit” and voilà.
A pre-approval letter, on the other hand, involves verification of information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial profile. A pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification, but the additional due diligence is exactly why the pre-approval carries more weight.
- 2. You’ll know how much money you can qualify to borrow.
Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-easy way to translate that monthly payment into a specific maximum mortgage amount because several other factors – down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on –are part of the calculation. And, you might not be qualified to borrow as much as you think due to your income, debts and/or credit history.
- 3. You’ll have more leverage in negotiations with the seller.
Sellers often prefer to negotiate with pre-approved buyers because the sellers know those buyers are qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable asset in a close, multiple-offer situation. Also, having a pre-approval letter in hand will give you more confidence when making an offer since you’ll know ahead of time that you’ll be able to get a mortgage.
- 4. Your real estate agent will work harder on your behalf.
A pre-approval letter signals to your agent that you’re a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale –and a commission –will naturally motivate your agent to devote more time and energy to you. In fact, some agents won’t even show properties to buyers who don’t have a pre-approval letter.
Getting a pre-approval letter provides many benefits when you’re looking to purchase a home. However, there are a few caveats. Pre-approval letters are not binding on the part of the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.
Keystone Mortgage provides Tennesseans with the best mortgage experience, period. So what are you waiting for? Apply here now.