Are you considering moving or purchasing your first home and do not know where to start; the first step in the home buying process is not searching online for your dream home, but getting preapproved to know what you can afford. Read below to learn more about getting pre-approved for a mortgage and more.
A preapproval letter from a lender lets you know how much you may be able to borrow, subject to a property appraisal and other stated conditions. Getting preapproved can be a good move for serious homebuyers because it shows sellers that you come to the negotiating table ready to complete the transaction.
Preapproval vs. Prequalification
A preapproval indicates that a lender has taken a detailed look into your financial background and has issued a preapproval letter, pending specific property information and documentation. Because preapproval includes a credit check, it’s more powerful than a prequalification letter, which generally only estimates what you can borrow based on information you’ve provided.
What are the advantages of being preapproved?
Preapproval can provide a number of advantages over waiting to apply for a mortgage until after you’ve found a home. It:
· Meets the expectation of real estate agents and home sellers, who are increasingly relying on preapproval to identify serious offers.
· Helps you shop confidently because you know how much you may be able to borrow.
· Can provide an advantage over other buyers who haven’t been preapproved.
· Lets you find out about and address possible qualification problems early in the homebuying process.
· May allow for a faster closing, since much of the work has already been done.
Who can benefit from preapproval?
Preapproval can be a great advantage for anyone buying a home, but it can be especially useful for buyers looking for their first home.
· First-time homebuyers. Without a record of previous mortgage payments, sellers may see first-time homebuyers as less likely to obtain financing than a similar buyer who’s already demonstrated the ability to meet a monthly mortgage payment. A preapproval helps even the field by showing the seller that a lender has already run the numbers and is willing to proceed with the transaction.
How does the process work?
Before you begin shopping for a home, ask your Real Estate Agent, Kevin Toll, for references for qualified mortgage brokers and then submit your financial information. They will review your loan application and then, if you meet qualification requirements, they will provide you with a preapproval letter for up to a specified mortgage amount, subject to certain conditions. A loan commitment is contingent upon verification of application information, satisfying all underwriting requirements and conditions, and providing an acceptable property, appraisal, and title report.