When you’re ready to buy a new home, it’s natural to want to rush ahead to the fun part—house shopping. It’s impossible to resist the thrill of attending open houses, checking neighborhoods on the internet, or dreaming of a life with a three-car garage and an ocean view.
But taking a little time to get pre-approved for a loan before you call a realtor saves you time and sets you up for success in five key ways.
1. Find the Right Lender
A mortgage is a long-term commitment and you want to make sure you’re working with a lender you like and at terms that work for you. If you wait until you’ve found your dream home to get pre-approved for a loan, though, you might be in too much of a rush to shop around for that perfect lender and loan. It’s best to get pre-approved to build a good foundation for your home-buying process.
2. Set a Budget
You might have your heart set on a three-story colonial with granite counter tops, Viking appliances and an in-ground pool, but is that realistic for your budget? There’s nothing more heartbreaking than falling in love with a home that’s out of your price range.
Pre-approval is a good way to provide a better estimate of your price range before you shop. It will also help you get an idea of what your monthly payments might be. Once pre-approved, you can focus your shopping on the house that’s right for you and your family.
3. Show You’re a Serious Buyer
Going to open houses, peeking at how people really live, and imagining how you would remodel their home to suit your taste is really exciting. So exciting that a lot of people do it when they aren’t really serious about buying.
Getting pre-approved for a home loan shows a realtor that your paperwork is in order and you’re better-able to buy. Some realtors will only work with clients who have a pre-approval in hand, because driving people around to look at homes is fun and all, but it doesn’t pay the bills.
4. No Nasty Credit Surprises
You know you’re supposed to check your credit report once a year. But if you’re like most of us, you may have missed the last year or two. The pre-approval process is a good chance to find out about any credit report mistakes or mishaps that could cause problems in the final stages of a loan. It’s a lot less stressful if you get those details cleared up before you have a seller waiting to close.
5. Faster Closing
Speaking of closing—gathering all the information for your loan approval can take a little time. And it takes the bank some time to process the paperwork too. By getting pre-approved, you’ve done some of the work up front and you are that many days closer to moving into your dream home.
What You Need to Know about Loan Pre-approvals
Thinking about getting pre-approved for a home loan? There are just a few more things you need to know.
- Pre-approval for a home loan is a more in-depth process than pre-qualification, which is a good thing for all the reasons above.
- Also, it’s important to remember that pre-approvals are usually only valid for a limited window of time, so keep in touch with your bank if you need to renew it.
- A pre-approval is not a guarantee to lend, nor does it require you to borrow the funds if you don’t find just what you’re looking for.