Nearly all buyers understand they should get a mortgage pre-approval letter from a lender before they begin their home search. But the reasons for this advice aren’t always explained, and buyers sometimes are overwhelmed by the amount of paperwork involved. But as a buyer, you are 100% in a better position if you take this all important step first. Here is some of the reasoning behind the advice:
Make Sure You Are Searching In The Right Price Range
Interest rates and loan programs are always changing. I have had initial consultations with clients who are way off on their estimates of what they could really afford. In some cases, buyers think they can purchase a lot more than banks would really lend them, and other times, they are limiting the potential of what they could purchase if they wanted to.
Your Focus And Success Rate Increases
By decreasing the inventory of homes to those that fit your parameters, you can spend more time thinking about the little factors each home has to offer. Lots of home buyers never move past the price point when sorting out their preferences, but now you can devote your energies to focusing on the things that matter to you most such as neighborhoods, proximity to schools, shops, etc.
When you find the right home, nobody can take it away from you because you cannot afford it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. Any errors and discrepancies that may show up on your credit report have already been taken care of and you can move forward knowing you are getting the best rates and deals out there. You’ll sleep better at night knowing that the home you selected is yours.
Increase Bargaining & Negotiating Power
Sellers typically do not accept offers that do not have a preapproval enclosed with it. Providing the seller with a solid preapproval or prequalification letter gives them the assurance that your offer if accepted will not fall apart because you wouldn’t be able to qualify for the home. In multiple offer situations or times when you as a buyer are trying to negotiate the best price, having your loan fully in place provides you with great leverage.
Enjoy a Faster Closing Period
Because the lender already has the bulk of your documents in hand, the whole process is streamlined and much less stressful for you as a buyer. You can spend your time focusing on analyzing the property that you are purchasing and getting ready for the move rather than searching for your tax records and pay stubs. Once in contract, an appraisal can be ordered and your loan approval for the specific property can get started immediately. It’s possible to shorten a 30-45 day closing to three weeks or sooner, which comes in handy if a seller needs to quickly move and can’t decide which offer to accept. Yours will move to the front if you can accomplish the seller’s need to quickly close.