Why do you need a pre approval letter before shopping for homes?
Some of the best advice a real estate agent can give their client or potential client is to get pre-approved early in the home buying process....before looking for a home is the best time. There are a number of reasons this is ideal and they all benefit you, the BUYER. While you aren't required to have a pre approval in hand in order to see homes with your Realtor®, it is crucial that you do so.
WHO needs to get pre-approved for a mortgage?
This answer is short and sweet.....EVERYONE who is considering shopping for homes in the next two weeks should contact their lender and begin the process. A buyer with a pre-approval letter from their bank is considered a SERIOUS buyer.
So WHAT is a pre-approval anyway?
A pre-approval letter is acknowledgement and verification from your lender that you are a qualified home buyer. It means the bank has examined your credit and assessed your ability to obtain a home loan/mortgage. In order to obtain a pre-approval from your lender, your banker will need to examine your bank statements, and tax returns for the past few years. The bank will also verify your employment. A pre-approval is a conditional commitment to a potential borrower from the lender.
All these steps must be taken eventually, and it is better to do it in the beginning before you begin house hunting. The last thing you want to do is find your dream home, and have someone else buy it first!
Is a pre-approval the same thing as being pre-qualified?
Being pre-qualifed for a mortgage is definitely NOT the same thing as being pre-approved. The mortgage pre-approval process is far more detailed and takes a little more time, because it requires a level of verification that pre-qualifying does not. While it takes more time, it also gives you much more buying power and clout with a seller. The extra time is time well spent, and definitely worth the effort. You will be so glad you did!
WHEN do you need to get your pre-approval?
Many sellers will not entertain an offer without it being accompanied by a copy of your pre approval letter. I have had many clients who didn't take my recommendation to get a pre approval from their lender seriously and they missed out on the house of their dreams.
The BEST time to get your PRE-APPROVAL is before you look at homes. Otherwise, you are spinning your wheels on a home you may not be able to buy. Even worse, a home that may be grabbed up by another buyer who is armed with a pre-approval and is therefore ahead of the game.
WHY you should get a pre-approval from your lender....
Besides all the other reasons I have given, here is another....The real estate market is saturated with buyers. As a matter of fact there are more buyers than there are homes on the market! You want to position yourself so that you have an upper hand. That means getting pre-approved so you have buying power.
Also, sellers take you for a serious buyer when you have already begun to work on your financing. Sellers like to show their homes to buyers who are qualified. There are a lot of potential buyers out there and many of them cannot even get a mortgage. Sellers want to show their homes to people who can buy.
As you can see, a pre-approval letter is a BENEFIT to you, my buyer. So what are you waiting for? Don't be afraid. Even if you think you may not be able to be approved, you won't know until you try. So let's do it! (Don't have a lender? I have recomendations!)