For most people, shopping for a home means shopping for a mortgage – a process that can be intimidating even for the financially savvy. When you shop for a home, you can choose to find the property first and then nail down the financing, but there is another, and potentially better, way to approach the financing puzzle.
Pre-approval allows you to qualify for a mortgage and determine exactly how much home you can afford to buy. Getting pre-approved for a mortgage has a number of important advantages, some of which are outlined below.
It Gives You Additional Negotiating Power
Shopping with a pre-approval letter in your hand gives you additional negotiating power, especially with a motivated seller or an owner who has been burned before. Nothing is more frustrating to a seller than accepting an offer only to find the buyer cannot obtain the proper financing. By getting pre-approved, you reassure the seller that you have the financing needed to back up your offer.
It Helps You Set a Realistic Budget
Setting a realistic housing budget is important when buying a home. Buying more home than you can afford is a recipe for disaster, but it can be hard to know what that limit really is.
When you go through the pre-approval process, the bank or mortgage broker will carefully examine all aspects of your finances, from reviewing your past tax returns to verifying your current income. They will then use that information to determine how much you qualify for, and give you a pre-approval letter to help you get started.
It Simplifies the Buying Process
Few things about buying a home are simple, but pre-approval gives you one less thing to worry about. Instead of fretting over the mortgage application process and worrying about whether or not you will qualify, you can focus on choosing the right home.
Getting pre-approved will also make working with the real estate agent a lot easier. If you are pre-approved for a $150,000 mortgage, the real estate agent will not waste his or her time (or yours) showing you a $300,000 home. Focusing on houses in your price range will make shopping easier – and faster.
The process of qualifying for a mortgage can be a difficult and intimidating one, but it doesn’t have to be. Getting pre-approved for a mortgage will make every aspect of the home buying process, from negotiating with the seller to establishing a realistic housing budget, a lot easier.