Get pre-approved
Find out how much you can borrow before you start looking. When you get a pre-approved mortgage, you will find out how much you can afford to spend on a home – and get a guaranteed rate for 60-120 days, even if rates go up.
Your mortgage specialist will take a look at your income, your credit history and your debt load to figure out how much you can afford to borrow, and how much your monthly payments will be. You will be asked to provide financial info, including down payment amount, a list of your assets and liabilities, and proof of income.
A lot of factors go into what you can afford
Some people choose not to get pre-approved because they think they know what they can afford to spend on a house. But they often forget to take other debt or poor credit history into account, and end up being disappointed when they find a house they love, only to find out they are not able to get a loan for it.
They also may not think in terms of how much money they need for other stuff. They may figure they can swing $3000 a month, but they forget about car payments, school tuition – or about the furniture they will need to buy to make the house liveable. Biting off more than you can chew, financially speaking, is not something you want to get yourself into. Being house poor is frustrating – and incredibly stressful. Pre-approval can help you avoid that situation.
It’s the edge you need when you’re house hunting
When you know exactly what you can afford, you can focus your search to a specific budget and not waste time looking at homes that are out of your reach. (There is nothing like falling in love with a place and THEN finding out you can’t quite swing it.)
Pre-approval also gives you an advantage when it comes time to putting in an offer. Sellers can see that you are serious about buying. And if you end up in a bidding war with someone who is not pre-approved, you have the upper hand, since you already have financing and do not need to go through the approval process. Sellers like that.
If your offer is accepted, all you have to do is send in the details, and the pre-approved mortgage will be converted to an actual mortgage within a few hours.
A locked-in rate
The rate you are quoted at pre-approval is guaranteed for 60-120 days. Should rates go up, you stay safe. If they go down, you get the lower rate. It is a complete win-win situation.
Pre-approval is a good idea for repeat buyers too
Even if you are not a first-time buyer, and are counting on the proceeds from a sale to fund your purchase, getting pre-approved before you make an offer can be a good idea. If your offer is contingent on the sale of your current home, and your home does not sell, it could fall through. Pre-approval lets you make a firm offer.
