Whether buying or selling a home, the real estate transaction process can be
seriously stressful. Hey, no pain, no gain. Getting pre-approved for a mortgage
can seriously reduce stress levels.
Lender Approval
Many people make the mistake of going house hunting without knowing exactly
how a large a mortgage they can get. This leads to incredible frustration when a
dream home is found, but you can't get a loan. For some shoppers, the
frustration and stress leads them to throw their arms in the air and give up on
the process. While an understandable reaction, the stress and frustration can be
greatly reduced by getting pre-approved for a mortgage loan.
Getting pre-approved by a lender involves going through the full mortgage
application process. You are going to fill out all the forms, provide tax
returns or salary verification, have your credit run and so on. The bank will do
a full analysis regarding whether you are mortgage worthy. It will also lay out
the specific requirements it expects you to meet including the down payment
amount and the specifications your potential home must meet. To this end, the
pre-approval process is always contingent on the appraised price of the
prospective home and any defects found in the home inspection.
Once a lender approves you for a loan, a magical thing happens. The lender
will issue a pre-approval letter. The lender letter indicates the bank has
approved you for a loan, the specific amount of the loan and often how long the
pre-approval will last.
The pre-approval letter is the golden egg in the home purchasing process. It
gives you a significant advantage over other people bidding on the same home.
Imagine you are a seller who receives to bids within a few thousand dollars of
each other. One bid has a pre-approval letter from the lender and the other does
not. Which are you going to choose?
Getting pre-approved also has additional benefits. As you go through the
process, the bank may alert you to problems. You can then go ahead and take the
necessary steps to fix the loans. Compare this to trying to get a loan while in
escrow. You are under a lot of pressure to get the loan in a thirty or sixty day
period. If you fail to get the loan, you lose your good faith deposit, which is
often thousands of dollars. Obviously, that is a disaster.
Whenever possible, get pre-approved for a mortgage before shopping for a
home. It will save untold amounts of stress and make the buying process much
easier.