Why is pre-approval important? If you are getting ready to get your first home, you may be wondering that why is pre-approval so important? Well, I have the right answer to this question. Follow this article to the very end to know the reasons.
In recent times, there are so many buyers searching for home than the homes available for sale. And this is creating a very serious competition in the market. And this is where pre-approval comes in. it is like a green light from a lender. You will get to know how much house you can afford and real estate agents and dealers will know you have finances lined up and ready to get a home.
Just so you know, a loan pre approval is a statement/ letter from a lender that state that you are eligible to borrow a certain amount of money. Also, it includes a pre approved interest rate. To come with this loan amount, lenders look at different factors including your credit score and income ratio. The better your financial status looks, the more you will get pre approved to borrow. To get the answer to “Why is pre approval important, read this article to the end.
Why is Mortgage Pre- Approval an important Step for Homebuyers?
There are so many reasons why you should get pre-approved before your start your house shopping. Check them out below;
It helps confirm your borrowing power
Before you start shopping for a home, it is very important to know your borrowing power. Calculators online will only give you an indication of the amount you might be able to borrow. Given your savings and income. But they won’t confirm the size of repayments you will be able to make after meeting your financial commitments and other living expenses.
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However, with a loan pre-approval, you will get to know exactly how much you can pay for a home. It gives a good understanding of your financial status and clear spending limit.
You are a more powerful homebuyer
Getting pre-approved shows sellers and agents that you are serious and financially prepared. They will feel rest assured that there won’t be any hold up in getting your mortgage. Since you have the backing of a lender. The Pre- approval letter shows that the lender has looked at your financial record and knows how much you can afford.
It will give you room for better bargaining
In addition to making you a more powerful buyer, Pre- Approval also gives you a good chance to negotiate and bargain. Your mortgage pre- approval can help you strengthen your position and make it very easy to get sellers to cover closing cost or repairs in the home.
Save some time
Imagine spending years looking for the best home, only to be rejected because of your finances once you find it. Knowing the amount you can borrow will remove the chance of this happening. Mortgage pre approval will give you a budget for property search and help you save more time. Also, it will help you avoid wasting effort on looking at properties you cannot afford and help prevent disappointments.
Helps Close faster
Usually, it takes up to 50 days to close on a house. And the delay is due to different factors, and that includes Pre-approval. If you have your mortgage pre approval in hand, you will be able to make the process faster and move to your new home earlier.
Securing your financing is the first step that happens when you want to close on a home. However, with Mortgage pre-approval, your financing is already secured. And you can move to the next steps like appraisal and inspection without delay. This is a very good one if the seller is trying to close sooner than expected.
With the above, am sure you already know why Mortgage pre approval is so important. Apply for a pre- approval today and enjoy more benefits.
How to get a Mortgage pre-approved
You need to start by knowing who your lender is. It is advisable to get a mortgage pre-approval from up to three different lenders. This will allow you to compare rates and choose the one the best lending terms. Furthermore, to provide you with a pre approval, lenders will need some specification information. Such as your personal information, income information and Asset information.
Make sure you have the information ready in time so that your pre approval process can go very quickly and smoothly. Once the lender has the documents they need, your application will go to an underwriter who will check the amount you qualify for. This process will take days or weeks depending on the lender you are work with. The mortgage preapproval is always valid for 60 to 90 days. For many people, this is enough to search for a make an offer with a home seller.
Does pre-approval matter?
If you are wondering whether or not pre-approval matter, Yes, for some financial institution. The pre-approval is used by financial institution to perform a hard credit check on your credit score to determine whether you are trustworthy for the service which is part of the preapproval process.
Is there a downside to getting pre-approved?
No, there is no downside to getting pre-approved for either loan or credit card or many financial services. However, there are other factors that might impact your internet interest which depends on the preapproval process. For instance, if you have a credit score below the normal score set by the financial institution, you might actually find it difficult to get a loan. And if you eventually get a loan, the interest rate might be higher than the normal rate.
Do pre-approvals hurt your credit?
No, pro-approval does not hurt your credit neither inquiring for pre-approved offer hurt your credit score. This only means in which you credit score can be hurt or affected if you follow through and apply for the credit.