Is 2022 your year to buy a home? Congratulations! Becoming a homeowner is a major life milestone, and this year is a great time to buy a home. But it’s crucial that you prepare as much as possible before you make the big leap. That includes getting pre-approved for a mortgage. But what is a pre-approval and why is it so important? Let’s find out.
What is a mortgage pre-approval?
In a nutshell, a mortgage pre-approval is a letter from a lender stating that you are qualified to borrow money to purchase a home. This letter will include how much you have been pre-approved for as well as the interest rate. Just be aware that the mortgage rate can change as the market fluctuates. To qualify for a pre-approval, the lender will look at things such as your income, credit score, and debt-to-income ratio. The better off you are financially, the more money you’ll qualify for.
It lets you know your budget
House prices can vary widely, even in the same neighborhood. To make your home purchase go more smoothly, you should know what you’ve got to work with. There’s nothing worse than getting your heart set on a home only to discover it’s out of your reach. When you get a pre-approval, you’ll know what your budget is. This will allow you to tailor your search to homes that fit within that price range. This will save you time and stress.
It shows sellers that you are serious
The real estate market has been incredibly competitive for buyers over the last couple of years. The pandemic has created an intense demand for homes, and there may be many other buyers out there interested in the same home as you. If you want a seller to take your offer seriously, then you must get preapproved for a mortgage. When you don’t have a mortgage pre-approval, it’s very unlikely that your offer will beat out any others. In a market like this, it’s essential to submit a pre-approval letter with your offer.
It will give you more wiggle room
Negotiations are a part of any real estate deal. You’ll be better able to negotiate with a seller if you get pre-approved for a mortgage. That’s because the seller knows you’re likely to close on the mortgage and may be more willing to make repairs or concessions on the listing price. If you want to have more power at the bargaining table, then a pre-approval is a must.
It will help you close faster
Getting approved for a mortgage takes time. Your lender will go through an underwriting process after your offer is accepted in order to approve your loan. You’ll be required to submit detailed information about your income, work history, financial obligations, credit history, bank accounts, credit cards, and more. When you’re getting pre-approved, you’ll be submitting the same paperwork that you will need for your final approval. That means you’ll save valuable time during the closing process because you’ve already gathered what you need.