Wednesday, January 2, 2019 / by Trish Ford
Buying a home is one of the most exciting investments you will make in your adult life. With stars in your eyes and dreams of open floor plans, garden tubs, and a big backyard, it is so easy to get caught up in the thrill of the hunt for your first home. However, before you set out on your home-buying adventure, obtaining a mortgage loan pre-approval is the responsible place to start.
What is a Mortgage Loan Pre-Approval?
In general terms, a pre-approval is a guarantee from a lender that you are already approved for a mortgage loan up to a certain amount. The lender has already verified:
- Your proof of employment
- Your credit score
- Your payment capability
- Your identity
- Your assets
Once you have this pre-approval, you will have a certain time frame for which you will qualify for the loan you are already approved to get.
What are the Advantages of Having a Mortgage Loan Pre-Approval?
Having a pre-approval in-hand for a mortgage loan brings along a host of advantages for you as you shop for a home, including:
- You will know what homes will involve what kind of payments
- Sellers may be more willing to negotiate because you already have secured financing
- When you do make a decision on a home, you can get through the lending process faster
With a pre-approval for a mortgage loan, you become a confident buyer. You know what you can spend, you know what homes are within budget, and you know where you stand.
What's the Difference between Pre-Qualification & Pre-Approval?
Pre-approval is the top choice and what most prospective buyers choose to try and obtain before they shop for a home. Pre-qualification basically means that you have talked to a lender about your financial situation and they have made recommendations about what price ranges you should be looking at. A pre-qualification is not a guarantee of a loan; the actual approval will be done once your situation and credit have been more closely examined. Therefore, being "pre-qualified" is not going to be taken as seriously when you are negotiating with a seller.