Being Pre-approved Leads to a Successful House Hunt

When you step into the real estate market to buy your next home, it is like a boxing ring, where you will find punches coming from left, right, and center. You might be knocked out in the first round if you are not ready to face the opposing boxer and don’t know how to strike back.

But the good news is that it does not have to be your first time swinging punches for the win. Before getting in the ring, you can practice and train for the fight. 

Similarly, before opting for a loan, you can get a warmup session to know if you are ready to begin the home-buying process. In the real estate world, this warmup session is a journey toward being preapproved.

What Does Being Preapproved Mean?

It can be hard to evaluate your financial performance and credit history to know the loan amount you are eligible for. That is where the lenders come in. 

With the preapproval process, they answer the big question you would have during the home buying process, “How much will the lender finance?”

Here, the lenders not only ask for the required information but also verify the claims with documents and proofs. This might not be hours long or an overnight process for instant results. Your patience might be tested as it can take a long time.

What Documents Do the Lenders Verify?

The goal of lenders verifying the documents is to assess your mortgage affordability and whether you will default on the loan or not. Some of the documents that ensure the lenders meet their purpose are:

• Personal Identification
• Income Source
• Employment History
• Bank Statement
• List of Outstanding Debts

Remember, there are no fixed criteria to evaluate your borrower’s creditworthiness. That is why each lender has their own method and may require different documents.

Does Preapproval Impact the Credit Score?

It is important that your credit score remains strong during the home-buying process. When the lender checks your credit report, it is a hard inquiry. This means your credit score may decrease. But luckily, this is temporary, and your credit score will soon be back to normal. 

One thing is for sure. We suggest not going on preapproval until you have dealt with any pending issues on your credit history.

Multiple hard inquiries during a short period can have a negative impression on the lender. They would think that you are consistently trying to get a loan but are failing in your question.

Did You Know
Getting preapproved does not give surety that you will get the loan when you opt for it.
It does make your home-buying process easier by making it likely to seek home financing.

Some Benefits of Being Preapproved For a Mortgage

We have discussed what is preapproval for a mortgage. But you would not want to stop there, right? Your questions would be, “What is in it for me? Why should I go for preapproval before starting your home-buying process?”

Well, here are some advantages that are waiting for you after you are preapproved for a mortgage.

Close the Deal Faster

There are loads of documentation and formalities that go into the loan opting process. Going for a loan straightaway might be confusing as you might not be sure of the requirements. That is where being preapproved for a mortgage makes things easier.

The documents you will need during the process of getting a loan are already verified in the preapproval process. That will save you a lot of time as the lender will not have to excessively review those documents again.

Preapproval in advance smoothens your home-buying process.

Know About Your Budget

Knowing how much you can spend on your next property is vital insight. Why? Because you don’t want to go through the long process of selecting a house only to realize the lender will not finance as much loan amount.

Being preapproved saves you from these unrewarding efforts and sets realistic goals, as you can almost accurately estimate the loan amount. 

Pro Tip
The estimate you get from preapproval is usually the maximum loan amount you can receive after the verification process by the lenders.

In addition to knowing about the loan amount, you can also budget and save money for the upfront costs and monthly payments. This can save you from getting into financial stress.

Secure a Loan that You Can Return

How much loan amount do you need to finance your next home? That is an important question.

Remember, you don’t have to take the entire amount you are preapproved for.

Here is an example. Suppose you are preapproved for $400,000. During your home-buying process, you realize that the home you want to buy is $300,000. You can take a $300,000 loan from the lender, as it may save you from the potential financial stress of paying the amount back.

Lay a Good Impression for the Buyer

You might not be the first home buyer that the sellers talk to, and you may not even be the last one. Being preapproved helps you stand out and get priority over other home buyers. 

The seller would know you have gone through the process of verification needed to secure financing. You will have more chances to strike a perfect property deal.

Negotiate Better

The reason why most lenders maintain a high-interest rate is because they are unsure if the borrower will default on the loan. The increased interest rate is to mitigate the financial dent that it may cause. But things are different when you are preapproved for a mortgage.

Since the lender has verified your financial attributes, you can bag a favorable interest rate. You can end up saving a lot of dollars on monthly mortgage payments. 

Summing It Up

Being pre-approved for a mortgage is perfect for your homebuying process. It allows you to shop for a property without the uncertainty it is the right one. You can start to look for your property at HAR, your solutions for elevating your living standards.