Why Get a Pre Approval?
home buyers know they should get a mortgage pre-approval letter from a lender
before they begin seriously shopping for a home. The reasons for this advice aren't
always clear, and buyers sometimes are dismayed by the amount of paperwork involved.
Here is some of the reasoning behind the advice:
pre-approval letter is more reliable than a pre-qualification letter. Getting
a pre-qualification is easy. You just call a mortgage broker or lender, provide
some basic financial information, then wait a few minutes for the letter to come
through your fax machine. Getting a "pre-qual" from a Web site is just
as easy. Enter some information, click "submit" and there you go. A
pre-approval letter, on the other hand, involves verification of all the information,
rather than taking your word on faith, the lender will ask for your documentation
to confirm your employment, the source of your down payment and other aspects
of your financial circumstances. Yes, a pre-approval is more time-consuming than
a pre-qualification but the benefits are defiantly worth it.
how much money you can qualify to borrow. Most home buyers have a general idea
of how much they would feel comfortable paying every month on their mortgage.
However, there's no quick-and-easy way to translate that monthly payment into
a specific maximum mortgage amount because other factors, down payment percentage,
mortgage insurance, property taxes, adjustable interest rates and so on, are all
part of the calculation. And, you might not be qualified to borrow as much as
you think you should be able to borrow, depending on your income, your debts and
your credit history.
have more leverage in negotiations with the seller. Home Sellers often prefer
to negotiate with pre-approved buyers because the sellers know such buyers are
financially qualified to obtain the financing they need to close the loan transaction.
A pre-approval letter is an especially favorable to a seller, in a close multiple
offer situation. And, you might feel more confident about making an offer with
a pre-approval letter in hand and the knowledge that you'll be able to obtain
a loan for the mortgage.
real estate agent will work harder on your behalf. A pre-approval letter signals
to your real estate agent that you're a well-qualified buyer who is serious about
purchasing a home. (anyone who has ever dealt with a Realtor knows that most Realtors
will not really start to house hunt seriously fro you until you have this letter).
The increased likelihood of a closed sale, and a commission, will naturally motivate
your agent to devote more time and energy to you.