It's the day until you're set to close on your home and you just got a dreaded call from your lender: They can't finance your home purchase.
It sounds like a total nightmare, and it's a situation many want-to-be-borrowers have faced. They have taken weeks of their lender's time, their agent's time, the seller's time, and their own time just to find out that the deal can't go through after all. What happened and how can you avoid this nightmare?
If you spend enough time shopping around on the local housing market, you might come across a few homes where your agent tells you it's back on the market because financing fell through. In other words, the last people who tried to buy it failed to get pre-approved before making an offer on their dream home.
What Is A Pre-Approval?
If you want to avoid issues with your financing, you need to go ahead with the pre-approval process. Basically, before you ever even find that perfect home, you're going to go to your lender and ask them to get the ball rolling. What they'll do is begin collecting all the paperwork they need to verify your income, make affordability calculations, and ultimately fund your mortgage.
During the pre-approval process, they're going ahead and getting all the numbers and paperwork out of the way. By verifying everything ahead of time, you're able to lock in an interest rate and be certain about how big of a mortgage they're ready to approve you for. This helps you avoid surprises at the closing table.
Why Get Pre-Approved?
The number one reason to get pre-approved is for your own peace of mind and well-being. Once you're pre-approved, you'll be certain of how much of a mortgage you can qualify for, what your interest rate will be, and so on. This will save you a lot of headache and heartache later on because you'll be able to shop for a house that matches your mortgage, rather than trying to do it the other way around.
The second reason is that being pre-approved will really help you gain a competitive edge, and that's a big thing in the housing market. Many buyers are tip-toeing around getting their feet wet. They may waste a lot of time on behalf of their agent and home sellers because they aren't really sure if they want to buy right now, and they're only just looking. A pre-approval shows that you're serious.
The third reason is also along the same lines of the above. Not only will the pre-approval letter tell your agent that you’re serious and that they should devote more time to showing you homes than their "maybe" clients, it also tells sellers that you're serious. Sellers know full and well that a person without a pre-approval letter may have financing fall through days or even weeks after the negotiation process begins. This entire time, their home will be marked as "pending" and it will turn other buyers off. If their financing falls through, they have to start selling all over again.
On the other hand, if you walk in with a pre-approval and you make an offer, it shows you are serious and actually able to move forward with the closing process. This can really give you the upper hand, especially when other offers are on the table.
Are you finally ready to be pre-approved? Apply now and our team of loan experts at Horizon Lending Services will help you get started.