Why Getting Pre-Approved for a Loan is Crucial Before House Hunting
by Ryan Edmondson
House hunting is an exciting journey, full of possibilities and dreams of your future home. However, before you dive into exploring listings and attending open houses, there's a crucial step you should take to set yourself up for success: getting pre-approved for a loan. Here’s why this initial step is essential and how it can benefit you in the home-buying process.
Understanding Pre-Approval
Pre-approval is an evaluation by a lender that determines whether you qualify for a mortgage and the maximum amount they are willing to lend you. This process involves a thorough review of your financial situation, including your credit score, income, debts, and assets. Unlike pre-qualification, which is an estimate based on your self-reported information, pre-approval involves a more detailed and verified assessment of your financial health.
The Benefits of Pre-Approval
1. Establishing a Realistic Budget
Knowing how much you can afford before you start looking at homes helps narrow down your options and prevents disappointment. With a clear budget, you can focus your search on properties within your price range, making the process more efficient and enjoyable.
2. Strengthening Your Offer
In a competitive housing market, a pre-approval letter can give you a significant advantage. Sellers prefer buyers who are pre-approved because it demonstrates that you are serious and financially capable of purchasing their home. It can also give you leverage in negotiations, potentially making your offer more attractive than those from buyers who have not been pre-approved.
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3. Speeding Up the Closing Process
Since much of the financial vetting is completed during the pre-approval process, securing final loan approval can be quicker. This can be especially beneficial if you are in a time-sensitive situation, such as needing to move quickly for a new job or to secure a home in a competitive market.
4. Identifying Potential Issues Early
The pre-approval process can uncover any potential financial issues that might prevent you from getting a mortgage. This early detection gives you the opportunity to address and resolve these issues before you find your dream home, rather than encountering unexpected roadblocks later in the process.
5. Gaining Peace of Mind
House hunting is much less stressful when you know you have already secured financing. With pre-approval, you can shop with confidence, knowing that you are well-prepared to make an offer when you find the right home.
How to Get Pre-Approved
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Check Your Credit Score: Your credit score plays a significant role in the pre-approval process. Obtain a copy of your credit report and address any discrepancies or areas that need improvement.
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Gather Financial Documents: Lenders will require various documents, including proof of income (pay stubs, tax returns), bank statements, and information about your debts and assets.
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Choose a lender: Different lenders may offer varying terms and rates. Although you may find an online lender with rates that seem too good to be true, in the end you might be better off going with a local lender who has more experience with the local market and has a better chance of getting you to the closing table. Often your real estate agent will be able to provide you with some great recommendations.
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Complete the Application: Fill out the pre-approval application with your chosen lender. Be prepared to provide detailed information about your financial history and current situation.
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Receive Your Pre-Approval Letter: Once the lender reviews your application, they will provide a pre-approval letter specifying the amount you are approved to borrow. This letter is typically valid for 60 to 90 days.
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Conclusion
Getting pre-approved for a loan before house hunting is a proactive step that can significantly enhance your home-buying experience. It provides you with a clear budget, strengthens your position in the eyes of sellers, and can expedite the closing process. By addressing potential financial issues early and shopping with confidence, you are better positioned to find and secure your ideal home. So, before you start visiting open houses, make sure you get pre-approved and pave the way for a smoother, more successful home-buying journey.
Edmondson Real Estate Group
412-368-2756
5915 Baum Boulevard Pittsburgh, PA 15206
Keller Williams Realty, Inc. is a real estate franchise company. Each Keller Williams office is independently owned and operated. Keller Williams Realty, Inc. is an Equal Opportunity Employer and supports the Fair Housing Act.
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If you have a brokerage relationship with another agency, this material is not intended as a solicitation. Information is reliable but not guaranteed and should not be considered legal or financial advice. Each Keller Williams office is independently owned and operated. Copyright (C) 2020 Keller Williams (R) Realty, Inc.
