The Benefits of Pre-Approval

What is Pre-Approval?

Lenders can give borrowers a pre-qualification letter, but most realtors suggest getting pre-approved for a loan before you even begin seriously shopping for a home. A pre-qualification letter will outline how much a lender thinks you can borrow based on your budget and credit profile. Pre-approval requires extensive documentation and verification by the lender to verify your financial status. Getting pre-approved shows you are serious, well-qualified, and can speed up the home buying process by helping you close quicker. Visit the Housing Hour to learn more about getting a pre-approval.

Prequalification vs Pre-Approval

It’s not hard to confuse pre-qualification with pre-approval. Many people interchange the terms, making it even more confusing. Pre-qualifying for a loan is a precursor to getting pre-approved. Pre-qualifying is more informal and not legally binding. If you are pre-approved, the lender has basically approved your loan, keeping in mind, your credit and financial situation remain the same or better as when applied.

Although this process may be time-consuming, by getting pre-approved, you can speed up the home buying process. You will have already completed two important steps in obtaining a home loan once you have gotten your pre-approval letter. You’ll have finished your credit check and all your documentation will be in place, speeding up the underwriting process once you make an offer on the house.

Advantages of Getting Pre-Approved

The advantages of getting pre-approved definitely outweigh the disadvantages if you are serious about finding a home. We have listed a few good reasons illustrating why getting pre-approved is a smart move. These advantages include knowing your loan amount and what you are able to afford, leverage for negotiating, saving time, and relieving added stress.

Pre-Approved Loan Amount

Obtaining a pre-approval letter from a lender will let you know the exact price range that you can afford to buy. Letting you know the loan amount you qualify for tells you what you can and can’t afford and will save time and money by narrowing down your options.

Leverage for Negotiating

Getting pre-approved lets sellers know you are serious about buying and have the capital to back up your intentions. Since the loan is all but approved, you can offer a price lower than the property is listed for. If someone offers more than you, but is not pre-approved, you still may have the advantage with your credible status as a home buyer.

Being Pre-Approved Saves Time

While the pre-approval process can be lengthy and in depth, at least you’ll have all the documentation you need to be in place for the underwriters to give your loan the go ahead. You can close faster on the home you want with your status as a pre-approved borrower.

Being Pre-Approved Relieves Stress 

Take a lot of the stress and headache out of shopping for a home by narrowing your options. This not only saves you time that could have been wasted shopping for homes outside of your price range, but it can save you time spent worrying about verifying your financial status for the home you want. Visit The Housing Hour to learn more about all things related to home ownership. There, you’ll find a treasure trove of helpful information and resources.