Buying a home has become something of a rite of passage. Because the purchase of a home is such an important part of creating personal wealth for the average American, prospective buyers sometimes attempt to speed up the process by skipping important preparations along the way. One of these preparations is getting pre-approved for the mortgage before beginning the search for a home to purchase. If you are thinking about purchasing your first home, here are three very smart reasons to select a lender and obtain a mortgage pre-approval before beginning to view any homes for sale.
1. A mortgage pre-approval helps prospective buyers set their home buying budget
When prospective buyers work through the mortgage application process with a reputable lender, they get a clear picture of how much of their budget they can readily afford to spend on home ownership. In addition, to the mortgage payment, prospective buyers must also make sure their budget can meet all the recurring costs of home ownership, including monthly utility costs, repairs, maintenance, property taxes, and home insurance. By taking time to get a mortgage pre-approval and learning about all the costs of home ownership, prospective buyers are vastly improving their opportunities to select a home they can comfortably afford long after the transaction closes.
2. A mortgage pre-approval adds weight to purchase offers, especially in a competitive buying situation
With current real estate market inventories tightening up, prospective buyers are finding that the competition for the best homes is high. When sellers know that they are likely to get more than one offer for their home, they often reject or discount any offers with financing contingencies that show the prospective buyer has not yet gotten pre-approved for a mortgage. Doing this helps the sellers weed out potentially risky offers and allows them to concentrate on the more serious ones. To help win in a competitive buying situation, prospective buyers who have taken the time to obtain a mortgage pre-approval will likely be viewed as more valuable by sellers and will be far more likely to get their offers reviewed and accepted.
3. A mortgage pre-approval prevents prospective buyers from experiencing unpleasant surprises
The emotional highs of falling in love with a home and having the purchase offer accepted can transition to outright devastation midway through the contract period if the prospective buyer cannot fulfill their loan contingency obligations. Even prospective buyers who work hard to keep their credit scores high can be turned down for the mortgage they need for many reasons, including debt-to-income ratios, job history, and other factors. Buyers who want to avoid the possibility of an unpleasant surprise when attempting to purchase a home should always begin by getting a mortgage pre-approval before looking at homes or making any offers.
Remember that a mortgage pre-approval is only one part of the mortgage loan application process. Full loan approval will require scrutiny of personal information and records, including banking, income taxes, and work history, as well as credit score information. To find out more about how mortgage pre-approval can help you succeed in purchasing a home you will enjoy for years to come, take time to discuss the matter with your real estate professional or trusted lender. They will be able to answer your questions and help you find a reputable mortgage lender to complete the mortgage pre-approval process.