Shopping for a home can be incredibly exciting, but if you’re serious about making it happen, it’s important to begin the process with a mortgage broker before going shopping. Most sellers expect potential buyers to have a mortgage pre-approval letter, and are far more amenable to negotiating with someone who does. Why? Because it proves you can obtain financing. Put another way, getting pre-approved makes the whole process more fluid, as it means that if you’re interested in a home, you can simply make an offer, rather than having to go out and apply for a mortgage first—potentially losing the opportunity to bid in the process.
Not only will landing a pre-approval set you apart as a buyer to be taken seriously, but you’ll also have a better understanding of how much you can afford to spend! To get a pre-approval, you’ll need to prove your assets, income, and good credit, as well as provide employment verification, among other documentation.
If you’re not convinced that getting a pre-approval is necessary, here are a few reasons it really is:
Buying power. Having a pre-approval letter means a lender has looked over your finances and determined how much you can afford. When you have the backing of a lender, sellers and real estate agents alike will see you as a more serious buyer.
Bargaining power. When you make an offer with a pre-approval already in hand, you tend to have better negotiating power because sellers know you’ve already spoken to a lender and that you’re intent on purchasing a home. In a competitive market, this can make all the difference.
Less wasted time. It should go without saying that being pre-approved can save you precious time by clarifying how much home you can afford, and helping you narrow your search down to homes within your budget.
Fewer surprises. Getting a mortgage pre-approval early on leaves a lot less room for unwelcome last-minute surprises when you’re finally ready to make an offer on the house of your dreams. No one wants the process stalled due to a low credit score or a subpar debt-to-income ratio.
Quicker closing. Since most of your financial information has already been collected and submitted, having a mortgage pre-approval can also facilitate and speed up the closing process so you’re not left waiting.
Other things to keep in mind
- Your typical mortgage pre-approval is valid from 60 to 90 days. If you need to extend that period for any reason, you’ll need to speak with your lender to find out what documents you need to submit to renew your pre-approval.
- As much as possible, avoid making any significant changes to your finances between getting a mortgage pre-approval and buying a home, as this could invalidate your pre-approval amount and force you to reapply.
- Remember that just because you’re pre-approved to borrow up to a certain amount doesn’t mean you should. Speaking to a qualified mortgage broker can help you determine just how much you can comfortably afford!