There are many advantages to getting pre-approved for a home loan.
If you are planning to buy a home in the near future, you should start shopping early with different mortgage lenders to find the best loan for you. You will also want to be pre-approved.
When you get pre-approved, you give a lender your financial details, and the lender reviews them to determine if you will likely qualify for a home loan. While pre-approval isn’t an absolute guarantee that you’ll get your loan, it does mean you’re more likely to get financing, as long as your circumstances don’t change.
Getting pre-approved for a mortgage can take time and effort, but it’s worth doing before you start open houses or schedule home visits. Let’s take a look at three big reasons why you should get pre-approved before you start the home buying process.
1. You will know how much your loan will cost
When you get pre-approved, your lender usually tells you what interest rate you are eligible for. Depending on your situation, you may be able to lock in this rate so you know exactly what you will pay for your home loan.
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If you know the cost of your mortgage in advance, there will be no surprises when it comes to buying your home. You can make sure that the amount you plan to borrow will match your budget. And you can assess whether the total costs you’ll pay for your home over time are worth it.
2. You will know what is the price range of your house
During the pre-approval process, lenders also tell you how much you are allowed to borrow. While there are many reasons why you shouldn’t be maximizing your budget when buying a home, it makes sense to have some idea of your upper limit.
That way, you won’t waste time trying to figure out if a home is out of your budget – and you won’t fall in love with a home you can’t afford.
3. You will have a better chance of getting an offer accepted.
When you find a home you like, you want the best chance of your offer being accepted by the seller. This means that you want to come across as a well-qualified borrower who can get a home loan and continue with the purchase.
Most sellers will not receive offers without proof that you can afford the property. This includes obtaining pre-approval from a mortgage lender. Since pre-approval can take a long time, you’ll want your pre-approval letter ready to send when you find a home you like. If the seller requires pre-approval, you could miss the property if another buyer submits an offer with collateral from a mortgage lender before you even get your pre-approval in hand.
By doing the initial work to get pre-approved, you’ll make your life easier during the home buying process. You won’t waste your time, fall in love with a home that’s out of your price range, or miss your perfect property because you haven’t matched your loan.