Most people think the first step to buying a home is looking at Open Houses, researching the market, and maybe finding a Real Estate Agent . But, before you even start looking for a home, you can put yourself at a great advantage by first getting pre-approved for your mortgage.
Why should this be your first step? To look for a home with confidence, you should make sure you are looking in the right price range. A good Mortgage Specialist will review all of your income and financial documents up front. They will help you understand what you can afford to spend on a home in terms of purchase price, down payment, legal fees and other closing costs based on your current financial situation and subject to a formal credit approval.
This is different from a ‘pre-qualification’. With a pre-qualification, your mortgage person will run calculations based on what you tell them your income and debts are. This will give you a ball-park figure for what you can afford, but beware…..if your credit bureau has not been pulled to check your credit and all of your documents have not been reviewed, you may not actually be able to afford that amount. For a true pre-approval, be sure your credit history has been checked and that all of your employment and financial documents have been reviewed. If you are ‘prequalified’ for your mortgage, it doesn’t necessarily mean you can afford that home or that you will get an approval from the lender’s credit department once you put an offer on a home.
Another advantage to being pre-approved is that when you put an offer on a property, the sellers will know that you are a serious buyer because you’ve already done the pre-approval process and have a lender who is willing to fund a mortgage for you. They know that you will be able to quickly remove finance conditions on the property and that you’ve already done your work to ensure you can afford the property. In a situation where there may be multiple offers on a property, the sellers will feel more comfortable accepting an offer from someone who is already pre-approved.
Save valuable time and streamline your home search. Everyone is busy these days. You don’t want to waste time looking at homes you can’t afford and your agent doesn’t want to waste their time showing you homes you can’t afford. To give both you and your Real Estate Agent piece of mind, get pre-approved and show your realtor the pre-approval letter provided by your lender. If you don’t have that pre-approval letter, you may not be pre-approved and you might be wasting everyone’s time looking at homes you won’t qualify for.
You also save time once you put an offer on a property. Because your lender has already pulled your credit and reviewed your income and down payment information, most of the work is already done. You’ll be able to get a quick approval and remove finance conditions way before your deadline.
With your mortgage pre-approved, you can shop and negotiate with confidence, avoiding the disappointment of finding the perfect home and then discovering you don’t qualify for the mortgage you need to purchase it.
Mortgage pre-approval carries no obligation to purchase, but it acts as a tool that can help you and your realtor focus on homes that are actually affordable. So, get excited about that home your Real Estate Agent showed you. You’ll know it’s in your price range and you can afford the payments on the mortgage.