Real estate agents recommend that home buyers must get pre-qualified for a home loan before they start shopping for homes. Going into the housing market without getting pre-approved is asking for trouble. Your pre-approval will determine how much you can afford on a home.
A mortgage pre-approval is a guarantee from a lender that you can borrow money to buy a house up to a certain amount. Your approved amount will be based on your income, employment, and asset documentation that you could supply at the time you apply for a loan, in conjunction with your credit history. This pre-approval takes the risk out of you being denied for a loan after you find the house you desire to purchase. Also, you can use it to your advantage when you negotiate a home’s price. Below are some of the reasons you should get pre-approved by a lender.
Know How Much House you can Afford to Buy
Getting pre-approved for a home loan lets you know how much house you can buy and streamline your house hunting. It prevents you from looking at houses you cannot afford. Properties that are beyond your price range will be out of the picture.
Increase your Chances of Getting your Offer Accepted by a Seller
In a hot real estate market, sellers tend to get multiple offers on their houses. A mortgage pre-approval can be your tool to beat the competition out. Sellers will always pay attention to those who have this pre-approval to ensure they get the money they expect from the sale. In some situations, sellers may even consider smaller offers as long as they come with the assurance of a smooth deal that your pre-approval brings.
Avoid a Financing Nightmare
In some cases, home buyers may make an offer on their dream house and have it accepted by their seller only to find they don’t actually have access to any financing. This situation could leave losing your down payment. Plus, the seller could take some legal actions against you. To avoid putting yourself at some risks, ensure you get your finances in order first before you start looking for homes.
Increase your Power to Negotiate
When compared to property buyers who haven’t obtained a loan pre-approval, getting pre-approved is likely to provide you with an edge when negotiating the home’s price. In case the seller is eager to sell, they may accept your offer since you are financially capable of buying their house.
Getting a mortgage is a lengthy process. Getting a pre-approval in advance reduces the amount of time it takes to complete the entire application process. With this, you could readily proceed with finalizing your mortgage after you find the house you desire to buy.
Know the Extra Costs
Some people who are buying their home for the first time don’t know the extra costs which come with purchasing a house. These costs include homeowner’s insurance, escrow fees, title insurance and other fees. After being pre-approved, you will be provided with a list of costs, making you equipped with information necessary to make decisions on purchasing a house like renovations, repairs, or landscaping.