Getting Pre-Approved for Your Loan
Mortgage Pre-Approval For Your New Home
The 3 Easy Steps
Benefits of getting preapproved
1 You’ll know exactly what you can afford: One of the most frustrating things that could possibly happen in a home search is finding your dream house, then going to the bank only to be told that you can’t afford it. By getting a pre-approval, you’ll know exactly what the upper end of your budget is, which will help you narrow down your home search before it even starts. One word of caution: Don’t submit your original preapproval letter with your offer, especially if you are offering substantially below what you can “afford.” This gives the seller more ammunition for negotiations. Most lenders will issue you a new pre-approval letter for the exact amount of your offer (as long as it’s under your preapproved maximum), so the sellers will have no idea of how much wiggle room you have.
2 Sellers will take your offers more seriously: On that note, submitting a pre-approval letter with an offer makes you a much more attractive buyer. Sure, your offer won’t be quite as appealing as an all-cash offer, but you’ll be taken a heck of a lot more seriously than a buyer whose offer is still contingent on mortgage approval. Your preapproval letter tells the seller that you want the house, and can actually afford to pay the amount you offered for it. It also says there is hardly any chance that you’ll run into financing issues before closing.
3 You can deal with problems before you’re in a time crunch: If there is a problem with obtaining financing, it’s much easier to clear it up before you’re locked into a contract. Let’s say your credit score is too low, and that it’s due to an error on your credit report. Well, this can take a month or so to clear up, and if you plan to close on your house in 45 days, it can put you in quite the time crunch. On the other hand, if you go for a preapproval, you’ll have all the time you need to deal with whatever issues you run into, before proceeding to the offer stage. Maybe you’ll need to order old pay stubs from your employer’s payment processor. Maybe you’ll need copies of your 2012 tax return, which you’ve since misplaced. Or maybe you have a borderline credit score for approval, and paying down a few thousand dollars of your credit card balances would push you over the limit. The point is that any of these are easier to deal with when you don’t have a deadline.
4 It eliminates surprises after you choose a home: Because you have already submitted your income documentation, had your credit checked, and jumped through any other hoops in the mortgage process, you’ll be in a position for a much smoother and quicker close than if you wait to start your application process until you find a house. The loan-closing process can take anywhere from two weeks to over a month from when you submit every piece of documentation the bank wants (and trust me, there can be a lot). However, if you’ve already done that, your lender can start getting your loan ready to go as soon as you have a signed contract, and you won’t need to scramble for documentation.