Getting pre-approved for a mortgage before you start your home search is the most important step. It gives you an idea of how big of a house you can afford, what kind of mortgage program works best for your needs and how much money you will need to buy the house.
In this article, we’ll discuss why getting pre-approved is of the essence even before you start looking for homes online.
What is a mortgage preapproval?
Being pre-approved for a mortgage means that a lender has reviewed your financial situation and confirmed your ability to take on mortgage payments. This means that you have submitted documentation to the lender such as W2s, tax returns, pay stubs, bank statements, etc., and they have reviewed them to make a determination on your qualification.
With a mortgage pre-approval, your lender estimates how much you can afford to borrow, what is the best loan options for you, what your interest rate could be, estimate your monthly payments and your estimated cash outlay for your purchase. You and your and your real estate agent can use this information to focus on the homes that you can afford.
A preapproval also shows home sellers that you are a serious buyer and that you are able to finance your purchase, which will make them more likely to accept your offer on their house.
What is the difference between a prequalification and a mortgage preapproval?
You might have heard the term “pre-qualification” before.
Even though they sound alike, the biggest difference is that a pre-qualification means that a mortgage lender collects some basic financial information based on your verbal indication. No documentation is required for a pre-qualification except for a credit pull. With a pre-qualification, a lender can help you understand how much house you can afford and give you some general information.
However, you should not put your faith on a pre-qualification as means that you will 100% get approved for the loan. More often than you think, your documentation will reveal certain things to the lender that may not be favorable to getting you approved once your loan is in the underwriting stages of the process.
In addition, home sellers may not be inclined on accepting your offer with just a simple pre-qualification as they would also be unsure if you would be able to qualify at the end of the day once you submit your documentation.
The bottom line
Getting pre-approved for a mortgage is vital to purchasing a home. You need to have the underwriting stage completed before you start your search for homes so that you can have an idea of how much house you can afford and what kind of loan programs work best for your needs.
Having this information beforehand not only helps you narrow down the kinds of homes that you can afford but also, makes you a much smarter homebuyer. It also increases the chances of you getting your offer accepted by potential home sellers and makes your loan process a lot simpler.
At Andes Mortgage, LLC., we work with you from the very beginning of the process to not only help you understand the steps of home buying but also, by helping you qualify for the best mortgage based on your unique situation. Getting pre-approved is extremely easy with us and you can start the process by clicking here.