You’ve found the perfect home. Clean modern lines, lots of light, the right number of bedrooms and baths. It even has a home office. You make an offer and then find out you can’t get a loan for that amount.
Nothing is more disappointing than falling in love with a home and finding it’s just out of reach. With mortgage pre-approval, this won’t happen. Here are 5 benefits of getting pre-approved for a mortgage:
1. Know what price home you can afford Mortgage pre-approval tells you what price home you can afford before you even begin to look. You fill out a loan application, and the lender verifies your income, credit history, debts and assets. The lender then tells you that you are pre-approved for a mortgage, how much money you can borrow and how much your payment will be.
2. Saves time searching for a home Most people begin looking for a new home online and plug their “must have’s” into the search tool – things like number of bedrooms, baths, style and the area you’d like to live in. Mortgage pre-approval allows you to include a price range you know you can afford. The search will then only show you homes that meet your spec’s and are within your budget.
3. Strengthen your negotiating power Real estate agents and sellers would rather work with pre-approved buyers. They know a lender has told you how much you can afford, so they have more confidence in your offer. A seller may get multiple offers but will look at any with mortgage pre-approval first. Even if your offer is lower, a seller views it as more of a “sure thing.” You are now also in a better position to negotiate!
4. Know about all your costs up front Nobody likes surprises. You know how much money you have for a down payment. You may also be thinking about the cost of any upgrades or renovations. However, buyers tend to forget about lender closing costs. With mortgage pre-approval, you’ll get a Good Faith Estimate (GFE) of closing costs—things like title insurance, homeowner’s insurance and escrow fees. You’ll know in advance about additional money you’ll need at closing.
5. Save time getting a mortgage Mortgage pre-approval shortens your time to getting a loan. The lender already has most of the information it needs to process your loan application. As long as there are no changes to your financial picture, an appraisal and homeowner’s inspection are among the few final pieces of information the lender needs before giving you a mortgage.
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