A mortgage pre-approval is an official letter from a lender that lets you know how much they are willing to let you borrow for a home loan based on a thorough analysis of your credit history, income and debt. There are many advantages of pre-approvals for active home shoppers and buyers, which we will discuss below.
WHAT ARE THE ADVANTAGES OF PRE-APPROVALS?
You will receive a pre-approval letter once you fill out a mortgage application and it will tell you how much a lender is willing to lend you. If you are shopping for a home, it’s important to know your price range early in the game. If you know what you can afford, you won’t needlessly shop for homes out of your price range. A pre-approval sets an upper limit on how much you are allowed to borrow, and being comfortable with your limits will help you negotiate a home purchase with confidence. Plus, since sellers like a sure thing, you’ll have an advantage over buyers who may not have been through the pre-approval process.
Additionally, you are more likely to get an offer accepted because sellers will typically want proof of pre-approval. This ensures them that you can get approved for the loan needed for the home purchase.
WHY SHOULD I BE PRE-APPROVED FOR A MORTGAGE LOAN?
A pre-approval takes your income, credit and assets into account. By engaging in the pre-approval process, you can uncover any potential financing issues early in the process. It’s better to know that there are issues to be handled before you get your heart set on a specific home. On the bright side, you might not have any issues to overcome and you will be able to truly enjoy the home shopping process.
A pre-approval can also speed up the homebuying process and allows you to shop around for low interest rates from various lenders.
HOW LONG IS THE PRE-APPROVAL VALID?
Your pre-approval is typically good for the “shelf life” of the documents used to create it. These will include a credit report, pay stubs, bank statements, W2s, tax returns, etc. The usable life of these documents will vary from lender to lender, yet it’s usually safe to say that your approval is good for approximately three months or 90 days. During this time, it pays to file all important financial documents so they’re readily available for future updates.
WHAT IF I CHANGE MY MIND?
That’s perfectly fine. There’s no obligation to purchase a home or use a particular loan program once you’ve been pre-approved. On the flip side, a pre-approval is not a contract and provides no guarantee of a loan approval. Usually, a loan approval is contingent on a home appraisal and a thorough review by mortgage underwriters. Your licensed Inlanta Mortgage loan officer can explain the process in great detail but there is no argument – the process of purchasing a home is easier when you have financing in place before you make an offer. We’re here to help you get started, and it’s never too early to do exactly that. Give us a call when you’re ready – find a loan officer near you.
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