Imagine beginning your home search and finding the perfect brick colonial with a spacious backyard. It’s situated in a great neighborhood, has all the amenities you’re looking for and is in your price range.
Or so you think.
In the home buying process, the last thing you want to do is become seriously interested in a house that you can’t get a mortgage for because of your finances or credit history. However, getting pre-approved for a mortgage before browsing local listings can alleviate this problem altogether.
Simply put, getting pre-approved for a mortgage means that your bank checks your credit and other financial information – such as pay stubs and W-2’s – to determine exactly how much it would be able to lend you to purchase a home, a commercial property, or a rental property.
However, this process is different than a mortgage pre-qualification, which occurs when the buyer provides their own financial records to the lender and receives a mortgage estimate, instead of an official, written document, in return.
Without a letter of pre-approval from your lender, someone selling his or her own home has no way of knowing if you can realistically afford to purchase their property. Even if you do have the financial assets needed to buy a house, getting pre-approved beforehand shows that you’re a serious buyer and not someone just wasting the seller’s time.
But most importantly, without getting pre-approved for a mortgage, a seller won’t accept your offer. It’s something that must be done prior to the closing, so why not have a lender verify your credit sooner, rather than later, so you don’t run into financial hurdles that may prevent you from buying your dream house?