A mortgage pre-approval is an incredibly useful process that helps you get the home you want! When you apply for pre-approval, your lender will review your finances and determine exactly how much they can lend you at a specific interest rate. With this information, you can shop for homes knowing how much money you can borrow. Read on to learn more about pre-approvals!
Why Pre-Approvals Exist
Mortgage pre-approvals exist for a few reasons:
- For convenience: in contrast to a last-minute approval, a pre-approval is unrushed;
- To help you figure out the maximum amount you can afford to pay for a home, saving you time from shopping for properties that are out of your price range;
- And to protect lenders from lending out more money than buyers can pay back.
Don’t Get Caught Without a Pre-Approval!
If you don’t get pre-approval, you might miss out on the house you want to buy. Real estate is competitive, and a pre-approved buyer is much more likely to get a house than a non-pre-approved one. A pre-approval shows that you’re trustworthy and ready to buy a home right now (instead of wasting a seller’s time).
Many sellers and real estate agents won’t consider accepting an offer if the buyer is not pre-approved. If you skip the pre-approval, you might inadvertently be looking at houses you cannot afford.
Pre-Approvals Vs. Pre-Qualifications: The Difference
Contrary to popular belief, pre-approvals are different from pre-qualification. With a pre-qualification, the lender does not check your credit or verify your documentation—it’s an informal process that doesn’t give you any promises. So, just because you got a pre-qualification doesn’t mean you’re good to go—though it can give you some helpful information to assist you in decision-making.
If you’re serious about buying a property, we recommend going ahead and getting pre-approved—that way, you’ll be closer to getting your mortgage!
Pre-Approvals Have an Expiration Date
Your pre-approval will expire. There’s always a possibility that your finances could change, so you will have to put in an offer within a certain period to take advantage of your pre-approval. Most pre-approvals are valid for 60-90 days after they are issued, though it can vary depending on the situation.
Pre-Approvals Don’t Affect Your Credit Score
Worried that a pre-approval will decrease your credit score? No worries—it won’t affect it at all. Getting pre-approved won’t hurt, it will only help.