In the previous blog, we discussed what lenders look at when homebuyers are applying for a mortgage, but when buying a house, do you know the importance of being pre-approved? The real estate market in Loveland, Colorado, is booming so being pre-approved for a mortgage is nearly essential when you’re planning on searching for property for sale. If you are beginning this process, contact a realtor who can guide you through each step of the way. The Janes Group wants you to be the owner of your dream home. Read through these reasons why it’s so important to be pre-approved.
Pre-Approval vs. Pre-Qualification
First, it’s important to understand the difference between being pre-approved for a mortgage and being pre-qualified.
- Pre-Approval is a written commitment from a lender to a home buyer. The lender will look at bank statements, tax returns, employment, and a credit report. Keep in mind that there are still conditions that must be met before the money is given, including an appraisal of the property for sale, homeowners insurance, and sometimes a home inspection.
- A pre-qualification is a lender giving a more general look at your financial situation and predicts what amount the home buyer can borrow. This often leads to the home buyer being denied an actual mortgage when a deeper examination is done of your finances.
Why Get Pre-Approved?
There are many headaches that can be avoided when you know for sure that you are approved for a certain amount from a lender. Here are the big ones:
Correct Credit Problems
Many home buyers know what issues will come up when a credit report is pulled. But for those who aren’t confident about their credit, this is a chance to see what comes up and will give you an opportunity to fix any problems. The time it takes to correct any errors or negative marks on your credit report is significant and can include sending letters to the creditor and credit bureaus. However, taking the time to make these corrections could end with a higher credit score, making it easier to be approved for a mortgage.
If you have already begun looking at houses for sale, you might realize that just because a real estate agent shows you a house, doesn’t mean you can afford it; especially if you don’t know what amount you may be approved for. Don’t visit a house, fall in love with it, and find out that you can’t find financing for it. Furthermore, if you fall in love with a house and then try to find financing, the house could be sold before financing is approved.
Because Loveland real estate has been so hot in recent years, there is a good chance that a house you love will have multiple offers on it. Being pre-approved for a loan doesn’t mean that you have to buy a house that is listed at that price. Shopping MLS listings for houses that are below the pre-approved amount gives you an opportunity to be competitive in multiple offer scenarios.
As exciting as it may be to start house hunting as soon as possible, taking the time to get pre-approved by a lender will save you from unnecessary heartache and stress. Work closely with a realtor to be sure that important steps aren’t missed in the process of buying a house. Contact a real estate agent at The Janes Group today to get started.