What is Pre-Approval & Why is it So Important?
Ready to start the process of buying a new home? One of the best steps you can take to strengthen your position as a serious buyer is to go through the process of pre-approval now. Having a pre-approval letter saves you time, and lets sellers know that any offer they receive from you is backed by the ability to obtain the necessary funding.
What Exactly Is Pre-Approval?
The short answer is that it is a lender’s preliminary assessment that determines the highest amount of money they would be willing to lend you for a mortgage. A final loan can’t be secured until you’ve chosen a specific property, but going through the parts of the process related only to your finances ahead of time makes the final loan process go more smoothly. They will look at all income, debt, and credit history to determine the amount you will qualify to borrow.
Pre-approval will give you the top end of your budget. This does not necessarily mean that you should be looking at properties that require you to borrow the highest amount you qualify to borrow. Make sure you also discuss the total monthly obligation – in other words the amount of money your mortgage plus insurance and taxes will require you to spend each month. It is important to shop within the price ranges that you are comfortable spending rather than pushing the limit to the top end of your pre-approval amount.
Pre-Approval Works to Your Advantage
There is no downside to getting your mortgage pre-approved. Sending a pre-approval letter as part of your offer allows sellers to see that you have already taken steps to secure financing. This is preferential because it gives the seller confidence in the seriousness of your offer and your ability to close in a reasonable timeframe should they choose to accept your offer.
In short: Pre-Approval for a Mortgage is the best thing you can do to make your offer look better other than hiring a Realtor with a great reputation. If the Realtor listing the home knows the Realtor of the buyer won’t present unrealistic offers on behalf of their buyers, then the Buyer’s offer is more credible.
Starting the loan approval process early also gives you and your lender an opportunity to find and address any issues. If any obstacles show up you can deal with them while you’re still in the process of looking for a property. Roadblocks can be handled, but trying to do it against a closing date deadline is much more difficult. With interest rates fluctuating, having the ability to lock in a good rate is also a big bonus.
Anything that can be done to make the final closing process go more smoothly is worthwhile, and a pre-approval is on that list. Have questions about what steps to take, or about anything related to Miami real estate? The Kern Team is here to help. Give us a call.
