Want to Buy a Home? Start With Mortgage Pre-Approval!
Homeownership Starts Here
Readers will learn how mortgage pre-approval simplifies the home buying process and saves time.
They will understand how pre-approval defines how much they can afford and helps budget for their closing costs.
The article explains how pre-approval provides financial clarity, streamlines the mortgage process, and is the first step in purchasing a home.
Mortgage pre-approval plays a crucial role in helping you purchase a home. If you don’t have a loan pre-approval you don’t know how much how you can afford – and what price point you should be looking at. For me as a Realtor, my clients second step after talking to me is getting together with a good local lender that can get them pre-approved for a loan.
In this article, we will delve into the ways mortgage pre-approval helps prospective homebuyers and why everything starts – or should start – with it.
Mortgage pre-approval is an important step in buying a home as it gives buyers the knowledge that they can get a loan, provides financial clarity on how much they are qualified to purchase, and it allows buyers to define their home search.
Simplify Your Home Buying Journey
Imagine walking into a car dealership without knowing how much you can afford to spend. It would be like shopping in a Lamborghini dealership when you could only afford a Prius. Can you imagine what shopping for a run-of-the-mill sedan would be like if you’d already convinced yourself you were buying a supercar instead?
Home shopping is much the same.
With pre-approval, you have a clear idea of your budget, enabling you to focus your search on properties that align with your financial capabilities – read ones that you can actually afford. You’ll save time, effort, and potential disappointment by targeting homes that fall within your price range.
We’ve seen it happen a too many times to count. At every price point in every area there are different features that you get fro you money. At $300k you might have three bedrooms, but at $325k you get four bedrooms. At $350k you get a one car garage, and at $375k its a two car garage with a larger driveway. …
That may seem simplistic, but if gives you an estimate of how small price differences can change what you get. You don’t want to shop down.
Proving Your Financial Ability
Mortgage pre-approvals show your credibility to sellers. You want to show seller’s that you are able to pay for their home. Why would a seller entertain an offer from you if you aren’t able to back that offer up.
In certain areas and at certain price points sellers want to see buyer pre-approvals to even view their homes. Basically if you can’t afford my multi-million dollar mansion, you aren’t allowed to walk through it.
I will tell you that as a rule I won’t show homes to buyers who aren’t pre-approved for a mortgage. I don’t want to waste my time or theirs, and if they can’t afford to buy a home then I’m not going to show it to them. So understand that a pre-approval shows real estate professionals that you are serious about buying a home.
‘Are you pre-approved for a mortgage’ is one of the first questions I ask potential clients.
Understanding Your Finances
Obtaining a mortgage pre-approval involves a thorough evaluation of your financial situation. Lenders assess factors such as your income, employment history, credit score, and debt-to-income ratio.
A loan officer will help you understand how much you can borrow, the interest rate you qualify for, and the estimated monthly payments. They can give you an idea of what your closing costs will be and how much you need to have for a down payment. You’ll be able to plan and budget accordingly.
I tell people who want to buy in 6, 12 or even 18 months until they want to buy a home that they should talk to a loan officer as soon as possible. If you need to save more money, fix issues on your credit report, or pay down debt you’ll have the time to get it done.
When it comes to how much home you are approved for, you might be surprised that you are qualified for much higher than you thought. You may only want to buy a $500k home even though you might be qualified to $600k. Be sure to talk with your loan specialist about how much you want to pay each month.
Do you Want a Loan Officer or Mortgage Broker?
We use the terms mortgage broker, mortgage specialist, and loan officer synonymously. And for our purposes, they mostly are. They represent a company that will give you a loan to buy a home.
But the differences between them are important to note. A mortgage broker generally has the ability to sell loans to multiple companies and can give buyers options at many different price and credit points. A loan officer generally works for one bank, credit union or lender.
Definitely ask a potential loan officer/ mortgage broker about how they work and what kinds of loans they provide. It’s worth understanding too, that most new loans are sold to investors. The bank that gave you your mortgage will probably sell your loan. Ask you loan officer what the likelihood that your loan will be sold.
Increases Confidence and Peace of Mind
Purchasing a home is a significant financial commitment. A home is often the largest and most important investment in a person's lifetime. A good home purchase can set you up financially for the future.
By getting a mortgage pre-approval, you can approach the process with a clear understanding of your financial position, and what you can afford.
Outside of finding a good real estate agent, getting that approval is Step #1 on your journey to homeownership. With a mortgage pre-approval and a rice range to start from, you can start defining your home search.
Start Getting Your Mortgage Pre-Approval Today
In summary, obtaining mortgage pre-approval is a critical step when embarking on the home buying journey. It provides financial clarity to your search and how much you are able to afford. Find a good local lender and start getting your mortgage pre-approval today if you haven't already.
By taking the time to get pre-approved for a mortgage, you position yourself as a serious buyer with the means to proceed. Good luck, and happy house hunting.
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