Mortgage Pre-Approval (All the Cool Kids are Doing It)

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Picture this…

You have been browsing houses online, maybe have even visited a few in person.

Then you find it. The house with everything you’ve been looking for. You can envision the decor, the coziness, and the shiny new key in your hand.

Of course you make an offer that can’t be beat. It’s your dream house, duh.

But much to your surprise, you don’t get your dream house.

You ask why.

The seller says they received your offer and one other offer. They chose the other offer based on pre-approval because they know the other buyers have taken the necessary steps to secure financing.

[womp, womp, womp]

Terrible right?!

And it could have worked out in your favor if you had just done the paperwork and verification beforehand. 

So, while mortgage pre-approval often seems frustrating and scary – the alternative is pretty disheartening and doesn’t help you get what you want. 

And I’m here to help you get what you want.

I will always advise pre-approval as your first step. You have to do it at one point or another, why not get it out of the way and then do the fun stuff? You could even stop reading this now and get the process started. 

If you’re still here, let’s talk about why and how to get pre-approved, and how it can benefit you in your journey to finding the perfect home.

What is Mortgage Pre-Approval?

Mortgage pre-approval is a process where a lender evaluates your financial situation to determine the maximum loan amount they are willing to lend you for a home purchase. 

What is the Pre-Approval Evaluation based on?

The evaluation is based on factors such as your:

• credit score 
• income
• debt-to-income ratio
• other financial details

Pre-approval provides you with a clear understanding of your budget and what price range of homes you can afford, making your house-hunting process more focused and efficient.

Benefits of Pre-Approval for Buyers

Knowing Your Budget Saves You Time

With a preapproval letter in hand, the search process can be streamlined to focus on homes within your budget.

Level Up Your Offer

Preapproval indicates to sellers that you are a serious buyer, and often will get your offer to be prioritized over other offers. This also gives you a stronger position during negotiations. In a competitive market, a letter of pre-approval could be the deal breaker and enhances your chance of getting that dream home!

Rapid Closing

Since you have already completed so much of the necessary paperwork and verifications during preapproval, the overall mortgage approval process tends to be faster, leading to a smoother and quicker closing.

Steps to Get Pre-Approved

1. Gather Your Financial Documents: Start by organizing essential financial documents, including proof of income, bank statements, tax returns, and details of your assets and debts.

2. Check Your Credit Score: Obtain a copy of your credit report and review it for any errors or discrepancies. A higher credit score can lead to better loan terms, so consider improving your score if needed.

3. Choose a Lender: Research various lenders, including banks, credit unions, and mortgage companies. Compare their mortgage products, interest rates, and customer reviews to find one that suits your needs.

4. Complete the Application: Fill out the mortgage application provided by your chosen lender. Be prepared to answer questions about your financial situation thoroughly.

5. Wait for the Decision: The lender will assess your application, review your credit report, and verify your financial information. If everything checks out, you’ll receive a preapproval letter indicating the approved loan amount.

Things to Remember about Mortgage Pre-Approval

Remember, mortgage pre-approval is not a commitment to borrow from a specific lender, nor does it guarantee the interest rate. Once you find a home and finalize the purchase agreement, the lender will go through a more detailed underwriting process to approve the loan fully.

The process is relatively straightforward, and the benefits are significant. So, before you embark on your exciting journey to homeownership, take the time to get pre-approved. It will undoubtedly make the entire home buying process smoother, more efficient, and less stressful.