Why is Pre-approval Important? | LendingQuarters
- Aug 02, 2021 by
Visit LendingQuarters to learn more about why pre-approval is important. In today's housing market, pre-approval is a must have when buying a home.
Why financial experts recommend, you shop for money before you shop for a new home.
Right now, with interest rates low due to the 2020 pandemic, millions of Americans are rushing to purchase a new home. Indeed, we're in the middle of a historic housing boom in America, and the market is fiercely competitive. Buying a new home now is a financially smart move, no doubt, as interest rates aren't guaranteed to stay this low forever. In fact, they're already starting to rise again.
These conditions and the realization that mortgage rates are lower but won't stay that way have many folks scrambling to find the perfect home. The problem is, many of their plans will be shattered. Why? Because they shopped for a home first and shopped for a mortgage last and, after finding their dream home, couldn't get a mortgage pre-approval fast enough to grab it.
In This Market, Rapid Decisions are Vital
Here's the thing; the market right now is on fire. Rather than days, weeks, or even months, homes entering the market right now are selling in hours! You could, for example, find a home you love in the morning and, by the end of the day, find out that it's been sold.
What that means for buyers is that being ready to make a decision is vital, and the best way to do that is to have a mortgage pre-approval before you start your home search. That way, if you find a home you adore, you can grab it before it's gone by providing your mortgage pre-approval documentation.
Frankly, many sellers and realtors won't even take your offer unless you have a mortgage pre-approval when you make it. As hot as the market is, they don't have the time to waste waiting for what could inevitably be a "no" because you couldn't get approved for a mortgage. So, again, before you start house hunting (and possibly having your dreams shattered), hunt for a mortgage pre-approval.
Why Does Pre-Approval Have Such Purchasing Power?
Think of a pre-approved mortgage as having cash in hand; with cash, you're ready to purchase without the need to check your finances or get approval. A pre-approved mortgage is the same. It says to the seller and realtor that you're financially able to make a decision right now. A pre-approved mortgage also:
Let the seller and realtor know the specific price range that you can afford.
Tell the seller and realtor that you're serious about buying, which can often lead to money-saving negotiations.
Helps to make the mortgage process less stressful and drawn-out.
What, Exactly, is a Pre-Approval Letter?
More than a prequalification letter, pre-approval of a mortgage shows you precisely what you can afford when buying a new home, as well as giving you an estimate of what your monthly mortgage payment will be. It also shows the same to sellers, letting them know that you can, indeed, purchase their home.
The letter itself comes from the lender of your choice. In no uncertain terms, it states that you (and anyone else who will be on the mortgage, such as a spouse or partner) have the financial ability to see the mortgage to completion and pay it off according to that specific lender's rules.
What's the Difference Between a Prequalification Letter and a Pre Approval Letter?
While a prequalification letter from a lender isn't the worst thing to have, it's not nearly as powerful as a pre approval letter. A prequalification is simply an estimate of what you might be able to afford and thus how much you might borrow. It's not a specific declaration of what you can afford or that your credit is healthy enough to purchase.
On the other hand, a pre-approval letter confirms your creditworthiness and affirms that a lender is willing to loan you the money you need. They've thoroughly checked your finances and credit history and have made an offer to lend you a specific amount of money. In short, it says that yes, you are financially able to afford a home in your particular price range.
Shop for a Mortgage Before You Shop for a New Home
Financial experts have always recommended getting a pre-approval letter from a lender before shopping for a new home in markets past. That holds true today and then some, especially during a housing boom that's
one of the biggest in recent memory.
A pre-approved loan will help you stand out from the (increasingly large) crowd of buyers. It will also tell sellers that you're serious and that you've already gone through all the paperwork and preparations. In short, a pre-approved mortgage is a valuable commodity in today's housing market.
LendingQuarters provides our visitors with access to the mortgage industry on demand. The platform empowers our customers with resources about the mortgage process and offers live contact options with a mortgage professional. Before the home search begins it’s important to know your budget. Our approach ensures there is someone to assist 7 days a week. Our best ability is our availability.If you have more questions about qualifying for a VA loan, visit our website to learn more.