It’s a prime misconception that the first step to buying a home starts with scrolling on zillow. Sure, you can reminisce about living in a multi-million dollar mansion, but when it comes to real estate, it’s important to set realistic boundaries. To rid all of the “ifs ands ors and buts”, it’s highly advised that an interested buyer obtains a mortgage pre-approval right off the bat. A mortgage pre-approval essentially confirms and validates your budget. This document is crucial in the home buying process for various reasons.
Sets a limit
After all of your documents are submitted and reviewed, a mortgage lender will provide you with a letter. The number listed will indicate how much you’re qualified for. It’s a key factor to be aware of this number when you’re searching for your dream home. A lot of the time, buyers tend to overestimate what they can afford. This is because a lender may not be able to use every dollar as legitimate income towards the purchase, such as cash. Someone who is uneducated in the field might add up and include money that cannot actually be supported on paper. This is why it’s significant to discuss with a professional.
When viewing submitted offers, the seller must take several factors into consideration. Of course high numbers are eye-candy, but anyone could tell you what you want to hear. Legitimacy is key when making a decision. Though it might not necessarily be required by all agents, submitting a pre-approval with your offer assists in sealing the deal. It certainly puts you on a higher step than those who do not. Why? It provides reassurance to both the listing agent and seller. Again, that letter confirms that you can actually provide the number you’re offering. Therefore, your offer will be more attractive and appealing.
During the pre-approval process, your lender will review credentials, including your credit score. As I mentioned before, it’s highly advised that you are provided with an approval before you even start the home buying process. By receiving this prior, discrepancies will be eliminated. Though your offer may be strong, if you have poor credit, there’s a greater chance that the listing agent and seller will turn their heads. If there is room for improvement, it’d be beneficial to have that taken care of sooner than later. Again, this is all reviewed by your loan officer, so receiving that pre-approval ahead of time will result in less surprises.