When looking to buy a new home, borrowers will often hear that they should get pre-approved for a mortgage before they start searching, but will ask why this is necessary? A borrower may be thinking, “I know how much money I make every month, how much I am willing to spend on my mortgage each month and how much I am willing to put down. My credit is great and I’ve been working the same job for the past 5 years.” While all these things are great, underwriting standards are not always as straightforward as you may think. For this reason, it is important to talk to a mortgage professional and get pre-approved before you start the home search.
A mortgage lender can help you explore different loan programs and determine which program best suits your specific needs, find any red flags that will need to be addressed, and confirm how much a consumer can borrow. If it is not the amount that you had hoped for, the mortgage lender can tell you what you need to do in order to qualify or what you could do in order to increase your purchasing power.
Another reason to get pre-approved for a mortgage is to make your offer look stronger to a seller. These days, homes are receiving multiple offers from individuals looking to purchase which means that the listing agent has to decide carefully which offer is in the best interest for the client to accept. When a home buyer has a pre-approval letter from a reputable mortgage lender to accompany their offer, they will appear much stronger and the seller will entertain it that much more seriously.
Try looking at it from a Realtor’s point of view. Imagine there are two offers that you are considering and you need to decide which offer your client should accept. You need to make sure their home sells on the first accepted offer an that the escrow closes on time. For the most part, both the offers are similar except for the fact that one has a pre-approval letter and the other does not. Which one would you chose? The offer with the pre-approval letter, of course!
When the seller is aware that the buyer has been vetted by a mortgage lender and can be expected to follow through with their offer, they are more inclined to choose that offer. Sure, the other offer may be able to follow through with a successful closing as well but if they do not have a pre-approval letter, it means they have not been vetted by a mortgage professional and may not qualify for the mortgage that they need to purchase the property.
It may feel like it’s a nuisance to get pre-approved in advance, but if you are serious about buying a home it will be the most important step you take towards achieving this goal.
The real estate market is hot and homes are going fast, so get pre-approved before you start your property search. If you want to know what it takes to get pre-approved for a mortgage, give us a call at 760-930-0569 and we will be happy to help you through every step of the process.