Getting Pre-Approved for a mortgage loan is a must
When looking for your dream home you want to come prepared. Speaking with a mortgage lender should be one of the first things you do. When working with a REALTOR®, in many cases, the REALTOR® may be able to refer a lender that is tailored to your needs. A mortgage lender will obtain specific financial documents and calculate how much of a mortgage you can afford. They look at a debt to income ratio and determine what you can financially afford in the way of a mortgage payment. This then establishes the amount you can borrow for a home loan.
Once the mortgage company has determined the amount you can borrow they will prepare a pre-qualification letter. When you find the home you want to purchase, the pre-qualification letter is simultaneously submitted with your offer. This gives you an edge up on someone who might submit the same offer but without the pre-qualification letter. The buyer knows you are serious and now knows you have access to funds to complete the transaction.
Consider the following:
You have been house hunting for several months. The home of your dreams now becomes available. No one tells you about the pre-qualification process. You put a bid in on your dream home. You and the seller work out the perfect scenario. You give notice to your landlord. The seller finds a new home. Everything is going great. You then receive a call from the financial institution only for them to inform you that you do not qualify for a mortgage of that size. Now the house hunting process starts all over for you. You most likely will not be able to keep the place you were renting. The Seller now cannot move because he cannot afford two mortgages.
Your pre-qualification letter is reviewed with your offer.
The other scenario is that your REALTOR® informed you of the pre-qualification process. You contacted a lender and obtained your pre-qualification letter. Now after several months of house hunting, the home of your dreams is available. You are one of two people submitting an offer. The seller views both offers. Your pre-qualification letter is reviewed with your offer. The other potential buyer does not submit a pre-qualification. Who do you think the seller will negotiate with first? Who appears to have the funds available for a quick, easy sale?
Why Get Pre-Approved?
The main reason to get pre-approved is so that you will know how much home you can afford. It also shows that you are a credible buyer and able to act fast when you find a home.
How Long Does It Take?
Most lenders can complete pre-approvals in less than 24 hours. Most pre-approvals are valid for 60-90 days.