5 Things You Need to Be Pre-approved for a Mortgage
Shopping for a home may be exciting and fun, but serious homebuyers need to start the process in a lender’s office, not at an open house.
Potential buyers benefit in several ways by consulting with a lender and obtaining a pre-approval letter. First, they have an opportunity to discuss loan options and budgeting with the lender. Second, the lender will check the buyer’s credit and unearth any problems. The home buyer will also learn the maximum amount they can borrow, which will help set the price range.
Potential buyers should be careful to estimate their comfort level with a given house payment rather than immediately aim for the top of their spending limit. Lastly, most sellers expect buyers to have a pre-approval letter and will be more willing to negotiate with those who prove that they can obtain financing.
A mortgage pre-qualification can be useful as an estimate of how much someone can afford to spend on a home, but a pre-approval is much more valuable. It means the lender has checked the potential buyer’s credit and verified the documentation to approve a specific loan amount (the approval usually lasts for a particular period, such as 60 to 90 days). Final loan approval occurs when the buyer has an appraisal done and the loan is applied to a property.