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16
Buying a House: Why Pre-approval Should Be Your First Step
When you commit to the idea of buying a new home, you'll probably want to jump right into it. You'll want to search online listings, check open house schedules and track For Sale signs in your neighborhood of choice. These activities will play an important role in buying a house, but it's important to obtain a mortgage pre-approval as your first step.
Our REALTORS® have helped many new homeowners in their home buying efforts. Experience has taught us that the mortgage pre-approval letter is important, but the approval process itself is an efficient way to address the financial aspects of buying a house. It can also help you make key decisions about your future home. Here's why the mortgage approval process is so important.
It's a financial reality check
When you seek pre-approval, you subject your finances to ruthless inspection. You ask a mortgage company to evaluate you financially to determine if you are capable of paying back a substantial longterm loan. It's a big step that requires you to document your income, assets, savings, credit rating, proposed down payment, and other financial details. You must produce formal records.
- Bank statements
- Check stubs and W2s
- 1099s and other proof of self-employed income
- Income taxes
It forces you to consider home affordability
A mortgage company will pre-approve you if they believe you're capable of paying back a loan based on your projected home purchase amount. If they can't finance you for the original amount you requested, the original mortgage company or another mortgage company might consider approval at a lower amount. Of course, the back and forth effort can be frustrating. If there's an application fee, it can also be costly.
To eliminate this problem, you should understand ahead of time what your monthly payment might be and if you can afford it. An online mortgage calculator can help. You input the cost of the home, the down payment, and the interest rate. It projects your monthly payment based on the amount financed. If you know you can't afford to pay the monthly amount it suggests, you can downgrade your expectations on home pricing before you seek pre-approval.
REALTORS® will know you're serious
Your REALTOR® will gladly commit time, effort, and energy to help you find a home that meets your needs. Before an agency goes to work for you, they'll want to know that you're willing to make an equally strong commitment. A pre-approval letter tells both a buyer's realtor and a seller's realtor that you're serious about buying a home and you're ready to get started.
Homebuyers will see you as a viable prospect
In a seller's market, a homeowner may have a number of prospects interested in their home. With a list of potential buyers from which to choose, a seller has more than one selling option. They won't feel pressed to consider any offer you make without proof that a mortgage company is ready and willing to finance the deal.
We can help
Our real estate professionals have the knowledge and experience to guide you through your home-buying quest. Contact us when you're ready to buy or sell your home. We can provide you with more information about the pre-approval process.
Note: a subscription to the Do Not Call list does not apply when requesting information from our company.
