Are there real advantages to being “pre-approved” for a mortgage?
Many times, I’ve told first-time home buyers that it’s critical to apply for a loan before shopping for a home, and it’s true; this is an essential first step. Of course, the same applies to those that are not forst-time buyers. Get pre-approved! But do you know that it’s far better to be pre-approved for a loan than to be pre-qualified? There are more advantages to gaining pre-approval than you would initially assume. When the lender hands a borrower a pre-approval letter, it means the borrower can:
•Save Time by Looking at the Right Homes
This way, you’ll save time by checking out homes you can actually afford to buy instead of falling in love with pie in the sky.
•Rate protection
A pre-approval is usually based on a certain rate of interest. If interest rates go up, you are protected for 60 days, 90 days or sometimes even longer, whatever the financial institution can offer. The beauty of a pre-approval is, however, that you will get the “lower” rate, if interest rates suddenly go down. A win-win situation.
•Spend More Time Examining the Right Homes
By decreasing the inventory of homes to those that fit your parameters, you can allot more time to thinking about all the little nuances each home has to offer. Lots of home buyers never move past the price point when sorting out their preferences, but now you can devote your energies to looking at the little things that matter to you most.
•Gain Confidence & Avoid Disillusionment
Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You’ll sleep better at night knowing that the home you selected is yours.
•Increase Bargaining & Negotiating Power
Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that the home is sold. You are so much more powerful this way, it’s almost as if you’re shopping with cool, crisp cash in your hands.
•Enjoy a Faster Closing Period
Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals can be ordered immediately. It’s possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can’t decide which offer to accept. Yours will move to the front if you can accomplish the seller’s need to quickly close. Mortgage approval is generally the longest condition to satisfy in a purchase contract, it is to your advantage to obtain a pre-approval letter as soon as you’re ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.
If you don’t have a banker yet or would like to hear a “second opinion”, please let me know and I can make several recommendations of people to talk to. No charge.