The Importance of Getting Preapproved for a MortgageBy First IB on February 29, 2016
Want to increase your odds of a successful home search? Get pre-approved for a mortgage so you can demonstrate to realtors and sellers alike that you’re a qualified, serious borrower.
We’ll share more about the advantages of getting pre-approved later in the article, but first we want to explain the difference between pre-qualification and pre-approval. Pre-qualification is a preliminary estimate that tells you the amount you’ll be able to afford to borrow based on the information you provide. It’s essentially an agreement in principle that the lender will lend you the money you need to buy a house, assuming you were accurate and honest about the information on your application, there’s nothing you didn’t know or neglected to include, etc.
Once you complete pre-qualification, pre-approval is the final step of the application process. To get pre-approved, you’ll be asked to provide the supporting documentation that is required as part of your application. Once your documents have been processed and verified, you will receive a pre-approval letter which can be used to assure real estate brokers and sellers that you are a qualified borrower.
Pre-approvals convince sellers that you’re a more serious, legitimate buyer. Holding a pre-approval letter from a reputable lender tells the seller, “My lender already received and verified my documentation. They’ve processed by application, found no issues, and are willing to put it in writing that they’ll fund my loan up to X dollars anytime within the next 60 days.” In a nutshell, pre-approvals provide assurance to the seller.
In a buyer’s market, that might not seem particularly important, but if you get into a multiple-buyer, competitive purchase situation, it can be a deciding factor in getting your house. Besides being helpful when negotiating a purchase offer, your pre-approval:
- May inspire your realtor (of the seller’s agent) to work harder to find you exactly what you want since he or she has more assurance that you’re going to purchase at some point.
- Helps expedite the time to close once you have identified the property you intend to purchase.
- Provides the best way to take care of any unforeseen issues before you close.