3 things you need to know about pre-approving your mortgage

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There are certain steps to take when you start looking for a home. You should take some time to interview real estate agents, make a list of the desired home features you are looking for, and get pre-approval for a mortgage… However, some buyers don’t take this last step either because they don’t know about it or because they don’t understand how it works. Here are a few things you should know about pre-approving your mortgage.

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1. It does not guarantee you a home loan.

You can assume that if mortgage lender pre-approves a mortgage, you automatically get this mortgage as soon as you are ready to sign it. But this is not the case. Pre-approving a mortgage is not the same as getting a real mortgage, and if your financial circumstances change between the time you pre-approved and the time you want to apply for a home loan, you may be denied.

However, pre-approval is a step in the right direction. And if from a financial point of view, nothing changes for the worse, then there is a high probability that you will get your mortgage as soon as you want.

When you go through the pre-approval process, the lender will give you a specific amount that you can borrow based on your income and the funds available to advance payment… This number is important because it helps you avoid looking at homes that are outside your price range.

3. It can help you win the bidding war against another buyer.

Because housing inventory is so limited these days, many homes on the list end up in bidding warwhen two or more buyers try to outbid each other in the hope that the offer will be accepted. And prior approval can be your ticket to success in such a situation.

When you come with a pre-approved mortgage, it sends a message to the seller that you are a serious buyer, whose finances have already been verified by the lender. This should give your seller some confidence that you are well positioned to obtain a mortgage, even if prior approval does not actually guarantee you a home loan. And this, in turn, can induce the seller to accept your offer, and not another.

How to get pre-approved for a mortgage

When you’re ready to start looking for homes to buy, contact mortgage lenders and seek prior approval… As part of this process, you will need to provide some basic financial information, including recent payroll receipts that serve as proof of income, bank statements, and a list of your existing debts. The good news, however, is that you will also need these items when you apply for a real mortgage, so you get this running around sooner.

Keep in mind that the mortgage pre-approval letter usually expires within 30-90 days, so it’s best to only look for it when you’re actually ready to start your home hunt. You can also find pre-approval from different lenders, as one may pre-approve you a higher loan amount than the other. It might work for you in a betting war.

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