Mortgage Pre-Approval from your Trusted Mortgage Knowledge Professional
As many first-time home buyers know, one of the most important steps during the home buying process is obtaining financing. But what they may not know is when they should get a mortgage pre-approval. The answer is simple – you should get a mortgage pre-approval prior to beginning your house hunt.
To find out why it is so important and to learn the difference between mortgage pre-approval and pre-qualification, continue reading.
Pre-Approval vs. Pre-Qualification
What is a mortgage pre-approval? A mortgage pre-approval is the process in which a lender gives their written commitment to a potential borrower to loan money. A pre-approval determines the house price that the borrower can afford, which allows them to budget for the home purchase and associated costs.
In comparison, a mortgage pre-qualification is simply a prediction of the amount a person will be able to borrow. In many cases, a pre-qualification is only as good as the piece of paper it is written on.
When Should You Obtain A Mortgage Pre-Approval?
Before you begin your house search, you should get mortgage pre-approval. Many buyers do not understand why this is important. Below are several reasons you will be glad you obtained a pre-approval for a mortgage before beginning your house hunt.
Correct Potential Credit Problems
It is not unusual for a potential buyer to not know what their credit score is – especially first time home buyers. If there is an error affecting your credit score, the sooner you know about it, the better. The process to get errors removed and your credit score re-adjusted can take a couple of months.
Another important reason why a pre-approval should be obtained prior to looking at houses is to eliminate disappointment. Unfortunately, there are many real estate agents who show their buyers homes, even though they have no clue whether the buyer can afford the home or not. This can be avoided by getting a mortgage pre-approval prior to heading out with a realtor and looking at potential homes.
Understanding the Costs
There are many costs associated with buying a home – some that you may not have even thought about. It’s not quite as simple as a 5-10% down payment. Typically when you buy a home, you have to pay a full year’s real estate tax, an entire year’s homeowners insurance, and other miscellaneous expenses.
In today’s local, real estate market, there is a strong possibility that a home up for sale will receive multiple offers. Did you know that a buyer who is pre-approved for a mortgage will have the advantage in a multiple offer situation?