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Get a Mortgage PreApproval Before Home Searching
Getting A Mortgage PreApproval Saves Hassles
Buyers with a mortgage preapproval have a distinct advantage when they find the home of their dreams and are ready to make an offer. An approved mortgage establishes a home or condo buyer's purchasing power. To speed the process and strengthen their offer position, many home buyers check their credit report and get preapproved for a mortgage before they even start looking for a house or condo.
Advantages to Preapproval
* Preapproval will determine the maximum you can spend on a house before you shop, so you know what price range to target. Many shoppers aim too high, bidding on a home that they later learn is beyond their means because of unforeseen debts or other financial factors.
* A preapproved loan is the equivalent of a cash offer. Sellers are more likely to accept such a secure bid over other, simultaneous bids for which financing is still pending -- even if those bids are higher.
* The contract you sign upon submission of your bid allows a finite period in which to find a mortgage -- typically 30 days or less. If you fail to secure financing within that period, the seller may drop your bid. In the meantime, another buyer may offer the seller a higher bid -- or even a lower one -- and bump you out of the picture. Some contracts allow the seller to find a mortgage for you if you miss the deadline, possibly with no consideration of the terms and how they affect you.
* Preapproved buyers can rush the closing if the seller is in a hurry to deal. Preapproval gives buyers bargaining power.
Approval vs. Qualification
Know the difference between preapproval and prequalification. Some loan officers and mortgage brokers prequalify applicants based on a cursory check, never going through the full appraisal necessary to guarantee a loan. Without written certification, it's not a true preapproval and it carries no weight. In a true preapproval, the lender will present you with a letter or certificate bearing your name and the maximum mortgage loan amount. It proves that an underwriter has completed all the checks and will guarantee your loan.
Many lenders preapprove applicants, mostly because it lessens the chance that the buyers will look to other lenders once they find a house. Preapproval, however, does not preclude shoppers from changing prospective lenders at any time.
How Long Does It Take?
The length of the preapproval process varies, depending on the lender and applicant. Some banks can complete it in one day. Lenders that promise 20-minute preapproval usually take that amount of time to gather and discuss the applicant's information, but the approval is still pending a review of the filer's resources, income and debt. Some lenders perform these checks over the phone.
Take a moment and consider getting preapproved for your mortgage. We suggest it to all of our clients because it both speeds and simplifies the buying process, making everyone's life easier.