Why Pre-approval Is Important
February 12th, 2014
February 12th, 2014
Perhaps you’re thinking of buying a new home, before you even begin to look at homes, you should obtain a mortgage pre-approval letter first. “Why?” you may ask. “All I want to do is look at some homes to see what’s available out there.”
A pre-approval letter shows that you’re serious about shopping for a home. And, your real estate agent will likely ask you if you’ve been pre-approved before showing you any homes anyway. Besides, it’s really in your best interest for the reasons explained below.
When you’re pre-approved for a mortgage, it means you have a written commitment from a lender that says they will lend you a specific amount of money to buy a home at a specified interest rate and for a particular length of time (such as 30 years).
A pre-approval letter holds more weight during the home search process than a loan pre-qualification, which is an informal estimate from a lender stating how much you may be able to borrow.
The process to obtain pre-approval also requires more paperwork. The lender will ask you to verify your employment and financial information. Because of this, pre-approval is more reliable indicator of your ability to repay a loan.
Why else is pre-approval important?
However, it’s important to note that pre-approval isn’t binding on the lender. It’s time sensitive and depends on the appraisal of the home you want to purchase. Also, if your financial situation changes (for example, you lose your job, buy a car or incur a lot of credit card debt), interest rates rise or the specified pre-approval time period lapses, the lender will have to review your situation again and recalculate your maximum mortgage loan amount.
So, if you’re ready to get pre-approved for the purchase a new home, contact Grandview Lending. Our mortgage specialists will walk you step-by-step through the pre-approval process. And remember, while it may seem like a lot of work to get pre-approved, it really is worth it in the long run.
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