The Importance of Getting Pre-Approved When Buying A Home

Gone are the days when you could see a home you love and within a short time, convince the owner to sell it to you on your terms. Today individuals have realized what a lucrative investment home buying is. For that reason, there are measures in place, such as a pre-approval, which is for the buyer’s benefit. In actuality, the necessary step of getting pre-approved acts as a reality check when purchasing a home.

Getting pre-approved should be your first step before purchasing a home, and here are a few reasons why.

Pre-Approval Protects You From Overspending

Some people assume that buying a home is the same as purchasing something at the store. The reason why not everyone is buying homes left-right and center has to do with the expenses associated with such an endeavor. As a buyer, you may have set aside a hundred thousand dollars for the purchase, but before that house becomes 100% yours, you will have paid twice that. When faced with the opportunity of being a homeowner, we tend to overlook realtor charges, taxes, ever-changing mortgage interest rates, and other related fees. But when you get a pre-approval, all of a sudden, you understand the exact numbers associated with buying a home you adore.

It is highly unlikely to overspend once you understand how much total is needed for a purchase. That way, you can settle for a property you can afford instead of overreaching.

Being Pre-Approved Simplifies The Home Buying Experience

Ask any proud homeowner, and they will tell you how stressful buying a home was the first time they did it. It is still stressful looking for the perfect realtor, finding a lender who will take you seriously, looking for the actual house you want, and traveling back and forth between homes on the market before settling on one that ticks half of your checkboxes. All that burden is significantly reduced when you first decide to get pre-approved.

After the approval, you get to understand what budget suits you, so you have fewer homes to look at and consider. Now you will know which lenders will accept your application faster and the right realtors for the job.

Being Pre-Approved Assures Home Sellers That You Are Committed

It is common for house hunters to realize that they are not ready for the purchase at the last minute after spending hundreds of dollars involving the proper authorities and realtors. When you get pre-approved is a sign to encourage a realtor that you are a potential buyer and not some window shopper tasting the water. Purchasing a home is an investment, and no one knowingly makes investments that are guaranteed to fail. With the approval, a seller can tell if you can make it through all the payments and not default soon. You are less likely to be duped because genuine sellers only work with individuals who legitimately qualify for approval.

What You Need To Get Pre-Approved

The pre-qualification process is there to ensure that you can service your loan correctly.

The necessary documentations

Before you can put your signature on the dotted line, you need to give the lender a copy of your driver’s license and social security number. The information will be used to access your credit report, but the lender is at liberty to ask for any other necessary documentation, so you should comply with all the requests at this point.

Show evidence that you are employed

The most important thing here is the play slip and be prepared for the lender to call your employer, who should collaborate with your story. In this case, the lender should be able to contact at least a previous employer. Self-employed individuals will be asked to avail thorough documentation of their tax records dating back two years. Also needed is legitimate business documentation to collaborate on self-employment status. You will also need to show your W-2 wage statements.

It would help if you were debt-free before being pre-approved

A good FICO score to have as a potential homeowner is 620, but a higher number will get things moving faster for you. A credit score, in a way, determines how much interest you get to pay per month, and the better your score, the less you get to cough up. For example, a $150,000 loan granted to the individual with a 620 score will attract a monthly payment of $773. Another person with a score of 760 on the same amount will only be paying $637 per month. These numbers may seem insignificant individually, but it totals up to a large amount that becomes a burden for a loan candidate with time.

Can you afford the down payment?

Here you will need to show verifiable bank statements, which should reflect your ability to settle the down payment. For example, veterans’ loans do not require down payments; therefore, not all loans carry this requirement. But you still have to own some assets equal to the down payment beforehand.

Being pre-approved is an opportunity you should grab and take advantage of because it guarantees you a chance of owning the home you crave the most. The secret here is to practice patience and conform to all the requirements.

Use our home loan calculator to estimate your total mortgage payment, including taxes and insurance. Simply enter the price of the home, your down payment, and details about the home loan, to calculate your mortgage payment, schedule, and more.