When you begin the journey of buying a home, there is a critical step that should not be overlooked. Namely, obtaining a mortgage pre-approval!

This may seem counter-intuitive for first-time home buyers. After all, how can you apply for a mortgage without knowing which home you intend to buy?

Buying a home is very different from any other transaction you are likely to make. Without a mortgage pre-approval, you are setting yourself up for potential disappointment!

Before going further, let’s explain the difference between pre-qualifying for your mortgage, and obtaining a mortgage pre-approval:

Pre-qualifying means that a lender has calculated your income, debt and down payment amount to estimate the home price you could afford, under assumptions about the type of mortgage you would seek, and the interest rate you might get. This helps you shop for homes within a price range that you should qualify for, but there are no promises by the lender.

Pre-approval means that a lender has verified your income, debts, credit history and financial abilities under specific underwriting criteria, and approved you for a mortgage amount at a certain rate and terms. In this situation, the lender is promising to finance your home purchase, as long as you continue to meet their underwriting criteria. The pre-approval is usually good for a period of 30 to 90 days, depending on the type of loan and the lender involved. You can generally “renew” your pre-approval at least once.

Important! A pre-approval doesn’t mean a lender cannot change their mind! If your credit score drops, or you change jobs, or you buy a new car before closing on your home, you could ruin the pre-approval. Lenders will screen all of your mortgage underwriting one more time before the deal closes. Any changes to your financial picture – even a cash windfall – can make your lender nervous and cause them to hit the brakes. Once you are pre-approved, do not rock your financial boat!

Even though a pre-approval is not an iron-clad guarantee, it represents the strongest mortgage preparation that a home buyer can reasonably make, with the exception of paying in cash! A mortgage pre-approval shows home sellers that you are ready, willing and able to purchase their home. This can make the difference between having your offer accepted, or losing the home to another, better-prepared home buyer! A pre-approval also gives you the ability to search for a home in the most appropriate price range, and submit offers with confidence.

Your Exclusive Buyer Agent can refer you to trustworthy mortgage lenders who will take the time to explain your options, and find the best mortgage program for your needs.

 

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