Pre-Approval

If you are looking to purchase a new property then it is important to understand the financing process. One of the biggest steps people often skip over is getting a pre-approval. Pre-approvals are often disregarded by people purchasing a new home, but they have many benefits. Getting pre-approved could end up saving you thousands of dollars on your mortgage even though it’s not always required.

Before discussing how a pre-approval can benefit you in the home buying process, you should know what a pre-approval is. It is a preliminary examination of your mortgage application that states you may be approved for a loan of up to a certain amount. It cannot be used as an actual approval as the application does not undergo the full underwriting process.

Benefits of getting pre-approved

Purchase limit

One of the greatest benefits of a pre-approval is that it let’s you know the limit of your purchasing power. Although the pre-approval cannot act as a full approval, it is still a good indicator of the house prices you can afford. This is very helpful when you are home searching or putting an offer on a house. Having this done will let you know if you can afford to potentially offer more or less than originally anticipated.

Some realtors who have listed a property may not even allow you to place an offer without a pre-approval in hand. They want to ensure you have the proper funds and financing capabilities already before even entertaining your offer. They may not even let you set up a visit if you cannot provide a pre-approval first. This can cause you to miss out on the opportunity if you need to get pre-approved before going back.

Rate hold

Perhaps what might be the most beneficial to clients who get pre-approved is obtaining a rate hold. A rate hold is a promise from the lender to hold the rate that is on the pre-approval. This can save people thousands of dollars if rates end up increasing prior to them purchasing a property. Rate holds can be held up to 120 days with some lenders. This means that if rates increase within 120 days from the date the pre-approval was issued to your purchase date, you still keep the same rate you had were given before. If rates decrease then you simply get the updated rate on your final approval.

Rate holds can vary in the length of time they can be held. Some are as little as 60 days long if it is on something like a promotional rate. Most often they are for either 60, 90 or 120 days depending on the lender and the rate conditions.

File preparation

An understated benefit of a pre-approval is the amount of your file that gets prepared throughout the process. There are many steps involved when you being the mortgage application process. The mortgage agent must collect a lot of information and documents to prepare the file. There may be questions about the file that need to be answered after it is submitted. Sometimes information is entered incorrectly and must be addressed. Additional documents that were not originally requested may need to be acquired to solve some potential problems.

All of this takes a lot of time to do. Time becomes very valuable when you have an offer accepts on a property. You may only have 1-2 weeks to fulfill the conditions of the purchase agreement. It may take too long to obtain all of the information and documents required in that limited time frame. If you take too long obtaining financing the sellers can reject your offer and move on to another buyer’s offer. This will cause you to lose the purchase and leave you stuck searching for another property. This process is quickened however, if you take the steps required to have a pre-approval done. You will have already filled out the majority of info required and supplied most of the required documents as well. In this case you cut your timeline shorter and allows you more time and less stress to obtain financing.

Get pre-approved today

All of these things make getting a pre-approval an essential part of the process that should not be overlooked. If you plan to purchase a home it is always in your best interest to get a pre-approval done. The process is quick and easy and it does nothing, but proved benefit to you. Talk to a trusted mortgage agent like myself and let me help make your lives easier!