Mortgage Pre Approval: 3 Reasons Why You Should Get It
posted in Mortgage News
If you want a ballpark estimate as to what you can afford when it comes to a mortgage, pre-qualification can be very helpful, but for more credible proof of what you actually qualify for, pre-approval is what you need.
What is mortgage pre-approval?
When you get mortgage pre-approval, a lender will use documentation of your existing income and credit history that you’ve submitted to them, to state in writing that you qualify for a mortgage and for what amount.
A term, interest rate and mortgage amount are usually specified and are valid for a brief period, assuming the relevant conditions are met.
Should you get mortgage pre-approval?
While it’s of course entirely your choice as to whether you get pre-approval (and a mortgage broker can advise you on this), there are a number of advantages of doing so, 3 of which are listed below:
- 1. Pre-approval confirms the amount you’re able to spend
With mortgage pre-approval, it not only becomes easier for you to search for a property within your price range, but it helps a real estate agent find the best home for you, too.
Remember that there are always fees associated with buying a home that must be accounted for, too, such as closing costs. Work these into your budget to help you find a home that you can realistically afford without leaving yourself high and dry.
- 2. Pre-approval can help you secure an interest rate while you search
While pre-approval doesn’t limit you to just one lender, it does guarantee that the rate you’re offered, will be locked in from 90 to 120 days; this can be incredibly helpful should interest rates rise while you’re still searching for the right property. If interest rates decreased, on the other hand, you’d still be offered the lower rate.
- 3. Pre-approval tells the seller that you’re able to finance the purchase
In a competitive market where sellers might receive more than one offer on their property, a buyer with pre-approval tells them that you’re able to go ahead with the purchase without any issues surrounding your finances.
It’s important to remember that once you’ve got pre-approval, you should take great pains not to put it at risk by overspending, not paying bills or opening up a new credit card. Until the mortgage application has gone through and the sale has been completed, try not to make any changes to your financial or employment status that could jeopardize your precious pre-approval!
Need more advice and guidance about pre-approval or getting a mortgage in general? Try talking to a local mortgage broker, who can walk you through every process with ease, and give you up-to-the-minute tips and tricks for securing a great deal on a mortgage.