Mortgage pre-approval is a process where a lender reviews the submitted documents based on your current income and credit history and then confirms your loan eligibility and loan amount in writing.
Pre-approval typically specifies the term, interest rate, and mortgage amount, and it is valid for 120 days, subject to meeting specific conditions.
Here are 3 benefits of getting pre-approved:
- Know Your Maximum Purchase Amount
With pre-approval, finding a home becomes easier, and your realtor can assist in recommending properties within your price range. While it’s tempting to look at homes at the top of your budget, it’s essential to consider closing costs, monthly mortgage payments, and other factors. Working with a mortgage agent, you can review your budget and find a home that fits your mortgage eligibility, as well as help you create a long-term financial stability plan. - Lock in Your Interest Rate for 120 Days
Getting pre-approved doesn’t mean you are committed to taking out a loan with a specific lender, but it does lock in the proposed interest rate for 90–120 days. This means that even if interest rates rise during your home search, you won’t be affected. If rates drop, you can benefit from the lower rate. Additionally, pre-approval can show sellers that you have the necessary financing in place, which is a significant advantage in a competitive market. - Show Sellers That Financing Is Secure
Finally, pre-approval serves as proof to the seller that you are capable of securing financing. This is especially advantageous in a competitive market with multiple offers. A pre-approved buyer can make an offer without financing conditions, which gives them an edge over other buyers who may have uncertainties regarding financing.
Additional Tip:
Since pre-approval is not the same as final mortgage approval, it’s important to avoid making decisions that could hinder your ability to secure the mortgage later. Before your mortgage application is finalized and the sale is complete, avoid quitting or changing jobs, purchasing or trading in a car, transferring large amounts of money between bank accounts, missing bill payments, or opening new credit cards. It’s crucial to maintain your financial and employment stability until the mortgage transaction is complete.
With careful preparation, we will guide you to a smooth closing. If you’re preparing to buy a home, feel free to reach out to REOCA anytime!
