One of the things you’ll hear about when you begin to the house-buying process is getting pre-approved for a mortgage. Some people don’t go looking for financing until they’ve found the perfect house, but there are a few reasons why you should talk to a financial officer first and get pre-approved for a loan.
Most people assume that they need to have a house in mind before they can go ask for a loan from a bank or other lending institution, but usually, the cost of the house has nothing to do with it. Instead, the amount you can borrow is almost always based on your financial situation, savings, and credit. The loan amount you’ll qualify will be the same before you find your dream home as it will be after, so there’s nothing to stop you from finding out how much money you can borrow before house hunting. In fact, doing so means you won’t have to worry about falling in love with a home just to find out you can’t afford it.
Being pre-approved may also help you in securing your home. Sellers who see that you have been pre-approved will take your offer more seriously. They know you have the financing to back up your offer, so there’s less of a chance that something will go wrong and the deal fall through. You both know you can afford the home and that a bank will lend you the money. It’s also actually becoming more and more common for sellers to reject any potential buyer who isn’t pre-approved.
Your realtor will also appreciate you being pre-approved. It actually makes their job a lot easier because they can search for homes that are in your price range in addition to looking for those that meet your other criteria. They will know that they’re not wasting their time showing you properties that you may not be able to afford.
It’s important to note, however, that being pre-approved does not mean you’ve already secured a loan. It simply means that a lender has looked over your credit history and has verified your income. You will still have to go through the entire approval process once you’ve found the house you want to buy, and there’s always a chance that you will be denied even after being pre-approved. However, there’s much less of a chance of that happening since you won’t be trying to get a loan for more than you can afford.