What is the benefit of having Mortgage Pre-Approval when looking for your First Home?
There is a difference between Mortgage Pre-Qualification and Mortgage Pre-Approval.
♦ Mortgage Pre-qualification is based solely on the you verbally share with your Mortgage Officer to qualify for a mortgage loan. The Mortgage Pre-Qualification Letter basically says that the lender will give your a mortgage when they see that the information you told us about is correct and meets certain qualifying standards.
♦ With a Mortgage Pre-Approval, the buyer supplies all the written documentation of the information they claim to be true. This formal application is reviewed by and underwriter to be sure the credit, income and assets are sufficient to obtain the loan you are applying for. Loan Officers can not issue a Mortgage Pre-Approval. Only a Mortgage Underwriter can issue a valid Mortgage Pre-Approval Letter.
If you are looking to buy your First Home is 2015, a Mortgage Pre-Approval is the smartest to get into your dream home. Here’s Why …
1. Knowledge is Key: A Mortgage Pre-Approval gives you a firm idea as to how big a house you can buy and how much of a mortgage you can afford. Lenders base this amount using a formula (your Debt-to-income ratio) that compares your income to your total outstanding debts, including your proposed new housing expenses. This will keep you focused on the big picture and help to prevent being disappointed if you fall in love with a home that is too expensive for your means.
2. Improve Your Negotiating Position: When a seller is comparing two offers and one of the buyers has Mortgage Pre-Approval, they have a high confidence level that their sale will go through and close sooner. This may help you to win in a competitive bidding situation.
3. Confidence in Your Offer: Knowing the the paperwork supporting the key information needed to obtain a mortgage has been reviewed by and underwriter will give you, and the seller, confidence that your offer is bona fide.
4. Keep Your Spending on Track: Having detailed information on your interest rate, down payment requirement, closing costs estimate and mortgage terms will help you stay with in your budget and be prepared for the closing of your loan.
5. Time is Valuable: Knowing what you and cannot afford can save you time and frustration in the house hunting process. This will also help your Realtor find the perfect house in your price range.
6. Move in Quicker: Having Mortgage Pre-Approval will save you time when your application is submitted for final approval. Most of the paperwork has been done, so all you should need to do is have the property inspected and appraised. The faster you can close, the quicker you can move into your dream home.
The Mortgage Pre-Approval process is not quick and not necessarily easy. But most REALTORS® will tell you that getting Mortgage Pre-Approval is the key to getting the new home you want.