Before you look for a home, you need to know how much money you have to spend. And for most new homeowners, the majority of that money is going to come in the form of a mortgage.
Before you buy your home (and secure your Huntington Beach mortgage), you have two options in determining your budget with your lender: you can either get pre-qualified or pre-approved for your loan.
Here's a good video to watch if you are brand new:
Many potential homebuyers don’t understand the difference and believe pre-qualification and pre-approval are interchangeable. But that’s not the case.
Pre-qualification occurs when you provide financial information to the lender and the lender uses the information you provide in order to make an estimate of how much they might be willing to lend you.
Pre-approval happens when the lender takes your information and supporting documentation (like pay stubs and W2s) and verifies it with the appropriate sources. Once your information is verified, the lender can give you an exact amount of how much they’re willing to lend you for your mortgage.
There are a number of reasons why you should get a pre-approval before starting your home search.
Here are three reasons why you should get pre-approved for your mortgage before looking at homes:
It Gives You An Accurate Budget
One of the main benefits to getting pre-approved for your mortgage is you know exactly how much you have to spend on a home.
With pre-qualification, your lender will give you an estimate of how much they might be willing to approve, but there’s no guarantee. So when you look at homes, you’re basing your search on a budget that may or may not get approved, which can lead to falling in love with a house that’s ultimately out of your price range.
Getting pre-approved for your mortgage gives you an exact number to work with, so when you’re looking at homes, you know exactly how much you have to work with. Having this exact number can help you narrow your search and ensure any offer you make will be safely within your budget.
It Sets You Apart From Other Buyers
For whatever reason, most homebuyers don’t get pre-approved for their mortgages. So by securing pre-approval before you look at homes, you’re setting yourself apart from other buyers, which can be especially helpful in a competitive market.
Let’s say a seller has two identical offers on the table: one from a buyer with pre-approval and one from a buyer without. The obvious choice is the buyer with pre-approval; they’ve already gone through the vetting process with the lender and have their mortgage approved. The buyer without pre-approval still has to go through the entire vetting process, which will slow down the deal - and there’s no guarantees they’ll even get approved.
From a seller’s perspective, it makes much more sense to work with buyers with pre-approved mortgages. So if you want to stand out in a competitive market, getting pre-approved is one way to do it.
Not Having Pre-approval Can Slow Down The Buying Process
Arguably the most important reason to get pre-approved for your mortgage is that not having pre-approval can significantly slow down the buying process - or stop it all together.
If you find a house you love, many real estate agents and sellers will require you submit a pre-approval letter along with your offer. Which means that you have to go back to your lender and get pre-approved, which takes time - time in which another buyer (a buyer who has pre-approval) can swoop in and take the house.
Getting pre-approved for a mortgage is the best thing you can do for your home search. It will ensure you have an accurate budget, you stand apart from the competition, and you don’t lose the home of your dreams to a better prepared buyer.
If you are considering buying or selling a home & require more assistance, visit Summit Lending online.
Here's another article you may like: https://www.zillow.com/blog/2017-predictions-renters-buyers-213957/