Thinking of buying a new home? You’ve probably heard about getting pre-approved for a mortgage. This important step on your path to homeownership comes with lots of great benefits. When you know what you can afford, budgeting is easier – which is especially crucial if you’re breaking an existing lease. Here’s why getting a mortgage pre-approval is the best thing you can do for your new home search.
What is a mortgage pre-approval?
A pre-approval is an important step in the mortgage application process. It provides potential lenders with evidence that you have already been approved for a loan up to a certain amount. This gives lenders confidence that you are serious about buying a home and have done your due diligence in securing financing. Pre-approvals also give realtors and sellers peace of mind that potential buyers are more likely to close on their purchase.
Here are some reasons why you should consider getting pre-approved before house hunting:
Reason #1: Know your homebuying budget
Buying a home is a major investment and you need to be clear on your finances. Getting pre-approved will give you a clear understanding of the maximum amount you can borrow, estimated interest rate, monthly payment, and closing cost. Knowing this information before you start looking at homes will help narrow down your search and prevent wasted time looking at homes that are out of your price range.
Reason #2: Lock in interest rates
If there’s one thing that’s been consistent with today’s market, it’s how interest rates fluctuate. Getting a pre-approval allows you to lock in an interest rate for a limited time (check with your mortgage broker for the exact length). This protects you from rate increases while you’re still searching for the perfect home.
Reason #3: Strengthen your offer
A pre-approval letter shows sellers that you’re serious about buying their home and have the financial means to do so. This can strengthen your offer and give you an advantage over other buyers who haven’t been preapproved.
Reason #4: Save time
Going through the mortgage process takes time. You will need to gather your financial documents and have your credit history reviewed. With a mortgage preapproval, you’ve already gone through the tedious application process and can skip ahead to finalizing the mortgage, which shortens the time between contract and close and gets you into your new home faster.
Reason #5: Identify potential issues
During the pre-approval process, lenders review your credit history and financial information. This may uncover potential issues that need to be addressed before applying for a mortgage. Addressing these issues early on can save time and prevent headaches down the line.
Now that you know the benefits of getting a mortgage pre-approval, here’s how you can prepare for the process.
Step-by-step guide to getting pre-approved
- Analyze credit score and history. Before applying, take some time to analyze your credit score and history in order to identify any issues that could affect your ability to secure financing. If necessary, take steps to correct any inaccuracies or address any areas of concern before submitting your application.
- Gather documentation needed for the application. Before you even begin your loan application, make sure you have all documentation needed to prove your identity, income, and assets such as pay stubs or bank statements. Lenders will need these documents to assess your financial situation before they can approve you for a loan.
- Submit application. Once you’ve gathered all the necessary documents and assessed your credit score and history, it’s time to submit your application! Your lenders will review it and provide an offer letter with details on the terms of the loan they are offering if approved (e.g., interest rate).
- Present the offer letter to the realtor or seller. Congratulations, you’ve been preapproved! You can take your offer letter from the lender confirming preapproval of your loan, and present it to the realtor or seller when making an offer on a property so they know you are serious about this purchase and able financially commit at closing.
By taking these steps outlined above, homebuyers can establish themselves as competitive contenders in the market while feeling confident about their financial security throughout the process.
We’re committed to making your home-buying process as simple and worry-free as possible. If you have questions about today’s market, please check out our Financing Solutions page.
S&A Homes offers a variety of new home communities and floorplans in the most sought-after locations in Central and South-Central Pennsylvania. We can also build your dream home on your own land! For more details, visit www.sahomebuilder.com or call 1-855-SAHOME1.