Long before you actually sign a contract to buy a home—even before you start looking at homes with your Realtor—it’s important to think through some of the financial dimensions of this big, important decision. You need to know how you’re going to pay for a house, and how much house you’ll ultimately be able to afford. You may also wish to get pre-approved for a mortgage, assuming that’s the financing route you intend to go down.
What is Mortgage Pre-Approval?
But what is mortgage pre-approval, exactly? Basically, it’s a process through which you show sellers that you are serious about buying a house—and that you are, in some sense, good for the money. Mortgage pre-approval is not the same thing as actually getting a mortgage. What it does get you is a letter from a lender, simply stating that you meet the criteria for a loan and that they will be happy to lend you the money you need, when the time comes.
In other words, a buyer who has pre-approval is all ready to find a home, make an offer, and ultimately pay for it. He or she has not been through mortgage underwriting, but has received the preliminary go-ahead from a lender. And all of that’s important. In fact, it’s something that we recommend to all buyers, unless you’re paying for your new home in cash. Going to look for houses without pre-approval is a little like going to the mall to shop and not bringing your wallet: Without the ability to make payment, you’re just not going to get very far.
What does the actual process of obtaining mortgage pre-approval look like, though? It’s usually quite simple. While actual mortgage underwriting is a more immersive and complex process, pre-approval is something you can apply for in just a few minutes. You need to provide the lender with some basic financial information, and permission to check your credit score, all of which you can do in an online application form. Check with your lender for the specifics here.
If you don’t yet know the lender you want to go with, of course, you can always check with us, as we are happy to refer you to someone in the area.
Pre-Approval vs. Pre-Qualification
As a footnote, we might point out that pre-approval and pre-qualification are two different things, and it’s important not to get them confused. Pre-approval is, in a word, more rigorous. In the pre-qualification process, you’ll submit some financial information to a lender, they’ll look at it, and you’ll get a basic yes or no to determine your loan eligibility. In pre-approval, you’ll actually have that financial information verified by your lender, and you’ll learn the exact amount you’re qualified to borrow.
That kind of knowledge really comes in handy when it comes time to house hunt, so don’t skip this important step of the process. Contact Minges Cline today to connect with a lender in the area.