Mortgage pre-approval for real estate financing will put you in a much stronger position when you’re hunting for the home you want to live in. By having this important pile of paperwork out of the way you can be confident that sellers and realtors will take you seriously. They’ll see it as a signal that you’re prepared to negotiate in good faith. It’s a launch pad to owning your own home.
The Difference Between Qualified and Officially Qualified
When you’re shopping around for home financing you are likely to hear the terms pre-qualified and pre-approved. The first term gives you a point of reference on how much you can borrow. However, pre-approval says that you’re certified to actually borrow the stated amount from that lender, in writing. Usually, a mortgage pre-approval is good for ninety days. The only thing left is to find a property that you like, and have an appraisal of its value and condition, to receive the go-ahead to fund your new home.
Once you have a letter of approval from one lender it doesn’t mean that you’re bound by their offer. You might still find alternative financing on better terms. What it shows is that you’ve demonstrated you’re really in a position to commit to the home buying process. In the minds of real estate professionals, pre-approval separates the serious buyers from the window shoppers.
Mortgage Pre-Approval Is Two Of Three Keys To Home Ownership
Lenders will be asking two specific questions when you apply for mortgage pre-approval: Are you likely to behave responsibly and do you have the financial capacity to make the payments? You’ll be judged by your behavior, as recorded on your three credit reports. This gives them a pretty good indication of how you’re likely to act over the long term. They’ll pay close attention to your payment history and how you’ve used or abused your borrowing opportunities in the past.
Lenders will then look for evidence that you have the financial capacity to take on the responsibility of a mortgage. They do this by analyzing your income and assets. They’ll be looking to see that you have a stable source of income and that you can meet your monthly obligations.
The Market Starts To Care When You Get Two Thirds Of the Way There
Pre-approval unlocks home financing in principle. To get the loan in practice your lender will have to give an additional approval for the property you intend to purchase, as it’ll be used as collateral to secure the loan. This stage is not part of mortgage pre-approval but it will need to be addressed before they agree to finally lend to you. The most important thing to remember is that you won’t lose a mortgage because you couldn’t get the house but, if you’re not pre-approved, you’re very likely to lose that house that you just fell in love with. Mortgage pre-approval is two thirds of the battle.