3 good reasons to pre-approve your mortgage

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If you are starting the home buying process, you need to take an important step before you call a real estate agent or attend open house days.

This step includes pre-approval for mortgage

It can take time to get pre-approved for a home loan and you will need to provide your potential lender with many financial documents. But there are three really important reasons why pre-approval should be one of the first things you do when thinking about buying your own home.

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1. Pre-approval lets you know your interest rate.

When you get pre-approved mortgage, you have the opportunity to find out what rate the lender will charge you based on your personal finances. This will help you decide if you can qualify for a loan at a competitive rate. You can also get a general idea of ​​how much your loan will cost you.

In many cases, your lender may agree to mortgage rate blocking, which will allow you to maintain the interest rate for a specified period of time after obtaining prior approval. You may have to pay a small fee for this, but it can protect you from a raise mortgage rates if you think they may increase in the period between your pre-approval and the purchase of the house.

2. You can determine how much you can borrow.

Your lender will pre-approve you for a specific amount of money based on a number of factors, including:

Once you know how much you are allowed to borrow, you can be sure that you are realistic about finding homes within your budget. This way, you can avoid wasting time buying property that is too expensive.

However, remember that you do not need to borrow the entire amount for which you are pre-approved. It just sets an upper limit that you must adhere to.

3. Sellers will want you to be pre-approved.

When you’re ready to make an offer for a home, sellers will almost certainly want to see a pre-approval letter as part of that offer. That way, they can be reasonably confident that you can actually get paid if you accept the offer.

Since this is a seller’s market and real estate is rapidly evolving, you need to make sure you have this prior authorization so you don’t lose your home while you wait to get it. This is especially true as it can take a bank several weeks to go through all of your documentation, determine if you are eligible for a mortgage, and get a pre-approval letter ready for you.

By getting pre-approved early on, you can ensure that the home buying process goes smoothly. You will know in advance what amount of mortgage you can take and how much it will cost you, and you will have documentation ready when you find your ideal home and are ready to submit your proposal. It’s worth taking the time to do when you start your home search.

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