Before you start searching online listings and viewing homes for sale, you’ll want to head to your bank to get pre-approved. This preliminary step in the house buying process will put you in a better buying position and may even save you some disappointment down the road.
At this point, you have saved your down payment and plan on moving in the next six months. The first reason that a pre-approval is an important step is that it helps you set realistic expectations for your search. It will determine what price range you can afford, making it easier to narrow down your choices. Your lender will examine your background information; things like income, down payment amount and credit rating. They will then inform you of the maximum amount they are willing to lend you to buy a home. It is important to remember that the amount they approve you for is usually going to be on the higher end of your comfort zone. Be sure that you fully understand your monthly expenses and what you are able to afford.
Getting pre-approved will also help things move along quicker and smoother during a negotiation. It will allow you to act fast when placing an offer on a home. By getting pre-approved you have started the application process for the mortgage. Your lender will provide you with a pre-approval letter, though it is important to remember that this is not a guarantee of financing. Most realtors will still recommend that you include a condition on financing in any offers you submit.
Some homes sell quickly, with multiple offers coming in within hours. Having your pre-approval in hand may put you at an advantage over others and the seller could even turn down an offer without one.
Be sure that you are qualifying for a pre-approval and not a pre-qualification. These two things are very different. With a pre-qualification, they will have a discussion about what you can afford, but they do not verify your financial information or do a credit application at that time.
Be sure to get pre-approved so that you’re one step closer to your dream home and the approval process should be painless.