The real estate market in Colorado Springs, Denver, and Castle Rock has undergone significant changes compared to previous years. Currently, there is a scarcity of available homes for purchase, leading to intense competition among buyers. When a property is listed for sale, it often garners immense interest, resulting in multiple offers being submitted within just a day or two.
Pre-Approval Letter with Contract
When potential buyers put in the offer, the seller’s real estate agent is requesting that it is accompanied by a pre-approval letter from a mortgage lender showing the offer is from a qualified buyer. So if you want to put in an offer on any homes that you see, you will need to be prepared to move quickly, because typically that house will go under contract right away.
Know Your Mortgage Payment Amount
The second reason you want a pre-approval first is because you will be more informed on what your down payment requirement will be, what the closing costs will be and who you would like to pay for them, and what your payments will be. I’ve had clients put in an offer, and then come to me for the pre-approval letter, and they were shocked by how low of a payment I could get them. They realized that they could have put in an offer on a larger home that they liked more that they had seen earlier that week, but it was now too late as that home was already under contact by someone else.
Get the Right Mortgage Loan Program
The third reason is you may be able to get a better rate or qualify for a better loan program if you prepare first. One of the jobs of your mortgage broker is to analyze your credit report. Sometimes there is incorrect information that needs to be removed from your credit report, and it could raise your credit score substantially. Or I’ve seen where just paying down a bill a couple of hundred dollars can raise the credit score by 20 points. Now you qualify not only for a better interest rate, but sometimes can open up some other programs that might have a lower payment with it.
There are several compelling reasons to obtain mortgage pre-approval before embarking on your home search in the current competitive housing market. By having your finances in order and securing a pre-approval letter, you can act quickly when you find your dream home, make well-informed decisions, and potentially access better mortgage programs and interest rates. Always ensure you are pre-approved before starting your home buying journey to position yourself for success in this dynamic real estate landscape.
Pre-Approval Mortgage FAQs
Being pre-approved for a mortgage means that a lender has evaluated your financial information, credit history, and income to determine the maximum loan amount you are qualified to borrow. This pre-approval indicates that you are a serious and capable buyer to sellers.
To get pre-approved for a mortgage, you will need to submit a mortgage application to a lender. They will review your credit score, income, employment history, and other financial documents to assess your eligibility for a loan. Once approved, you will receive a pre-approval letter stating the maximum loan amount you qualify for.
No, a pre-approval is not the same as a mortgage commitment. While a pre-approval indicates that you are eligible for a loan based on initial assessments, a mortgage commitment is a formal agreement from the lender to provide you with a specific mortgage loan amount, usually after a property has been appraised and other underwriting conditions are met.
The validity of a mortgage pre-approval varies depending on the lender. Typically, pre-approvals are valid for about 60 to 90 days. After this period, you may need to update your financial information for the lender to reassess your eligibility.
Yes, the pre-approval amount can change before closing on a home. Any significant changes in your financial situation or credit history between the pre-approval and closing can affect the final loan amount. It’s essential to avoid major financial changes during the home buying process to ensure a smooth transaction.