Buying or selling a home can be a very stressful process. Hey, no pain, no gain. Getting pre-approved for a mortgage is a great way to relieve a lot of stress.
Lender Approval
Many people make the mistake of going house hunting before they know how much they can borrow for a mortgage. This makes it very hard to get a loan when you find your dream home but can't buy it. Some people get so angry and stressed out while shopping that they throw up their hands and give up. Even though this is a natural reaction, getting pre-approved for a mortgage loan can help reduce a lot of the stress and frustration.
To get pre-approved by a lender, you have to go through the whole process of applying for a mortgage. You will have to fill out all the forms, show proof of income or tax returns, have your credit checked, and so on. The bank will do a full check to see if you qualify for a mortgage. It will also tell you the exact requirements you need to meet, like how much of a down payment you need to make and what your potential home needs to be like. In order to do this, the pre-approval process is always based on the home's appraised price and any problems found during the home inspection.
As soon as a lender agrees to give you a loan, something magical happens. A pre-approval letter will be sent out by the lender. The lender letter tells you that the bank has approved you for a loan, tells you how much the loan will be, and often tells you how long the pre-approval will last.
In the process of buying a home, the pre-approval letter is the golden egg. It gives you a big edge over other people who want to buy the same house. Imagine that you are selling something and you get two bids that are only a few thousand dollars apart. The lender has given a pre-approval letter for one bid, but not for the other. Which one will you pick?
There are also other benefits to getting pre-approved. During the process, the bank may let you know if there are any problems. Then you can fix the loans by taking the steps you need to. This is like trying to get a loan while your house is in escrow. There is a lot of pressure on you to get the loan in 30 or 60 days. If you don't get the loan, you lose the good faith deposit, which is usually a lot of money. Clearly, that's a bad thing.
Whenever possible, get pre-approved for a mortgage before shopping for a home. It will save a lot of stress and make it much easier to buy something.
