Getting pre-approved for a mortgage is one of the smartest things you can do as a first-time home buyer. However, there are likely many things you don’t know about the process and requirements of getting this approval. To better prepare yourself for applying and what to expect afterward, some crucial tips are given below. With this new knowledge, you’ll have an edge ahead of other home buyers and will be doing something you thank yourself for down the road. To get started, begin by learning more about applying for pre-approval.
Tip 1: Look at Your Options for Lenders
There are many lenders you can choose to get pre-approval for, so don’t make the mistake of going with the first one you see. This is often why most buyers work with mortgage brokers who will compare different lenders and find the very best option for you. If you’re not familiar with a mortgage broker in your area, as your trusted real estate agent if they can recommend someone. Otherwise, there are many online resources you can use to find which lender is the best choice for your finances.
Tip 2: Prepare Before Applying
To make the application process easier, gather all of your financial documents in one spot. By doing so you won’t have to rush around to find these last minute, as every lender you work with is likely to ask for them. Some of the most important papers to collect include: down payment proof, social security number, bank information, proof of income, tax paperwork, and any other documents that prove your income.
Tip 3: Apply and Wait
After you submit all of the paperwork required, the lender will verify your information and determine how much of a loan you’re qualified for. This process can take several weeks, depending on the lender and your information. Fortunately, once the waiting period is up, you’ll have an answer to whether or not you’re pre-approved. If you are, you will know what your interest rate is and how much you’re pre-approved for.
Tip 4: Shop Within Your Boundaries
The amount that you’re approved for, which will be included in your pre-approval letter, isn’t the amount that you have to shop with. You can certainly look for homes that are priced lower, just in case you’re not comfortable spending at your maximum budget. The good news is that once you have this number, you can begin narrowing down your choices for homes. The most important reason why you need a mortgage pre-approval is that you’ll know what you can afford and what you may have to sacrifice in order to get your ideal home. For most people, this is when reality sets in, as they’ll know if they can afford a big home in their favorite neighborhood or have to compromise and get a smaller home to be in the same area.
Tip 5: Know That You Have an Advantage
With a pre-approval letter in your hands, you’ll have something that many other buyers do not: proof that you are qualified for a loan and are serious about buying. With that you’ll be at an advantage over other buyers, therefore becoming more likely to win the home you want in a bidding war. Sellers may also be more willing to negotiate with you when they know you’re pre-approved, as that provides them with more security knowing the deal is less likely to not go through.
Making Buying Easier
If you are ready to buy a home, don't forget to create a budget to understand how much you can spend on your house every month. All of the above reasons should give you an idea of why getting a pre-approval is crucial. When you meet with your real estate agent they’ll also be glad you’ve taken this step, as it makes the entire process easier for both of you. With this in hand and some additional resources about how to buy a home, buying a home will be much more exciting and more likely to go smoothly!