Part 1: Mortgage Preapprovals
One of the questions I get asked the most is, should I get preapproved for a mortgage before looking for a new house?
The general answer to that question is yes. A mortgage preapproval comes in the form of a letter and will accurately measure your income, assets, debts and down payment amount in order to let you know exactly how much you can spend on your home.
The biggest upside to getting preapproval is because it gives you a ballpark budget to keep in mind before you start seriously looking for a home to buy. This will ensure you know exactly what you can afford. One of the most common mistakes I see from home buyers is that they fall in love with a home they simply cannot afford because they have not taken the time to get a mortgage preapproval.
But there are also many other important reasons why you should get preapproved for your mortgage. Once you’re preapproved and find the house of your dreams, it makes it that much easier to make a confident offer on the house. Realtors and sellers view people with mortgage pre-approvals as more serious buyers and it can give you an edge in a bidding war. There are some realtors who will actually reject an offer from a buyer who does not have a preapproval letter from their lender.
Getting a mortgage preapproval also gives you a 90- to 120-day rate guarantee which will protect you if interest rates rise while you’ll shopping for your home. The best part about a mortgage preapproval? It’s completely free and there’s zero obligation to go with the lender who gave you the approval. You can get pre-approvals from banks, credit unions or private mortgage brokers. The only catch is that you can only have one preapproval at a time, per lender, and when your rate guarantee timeframe is up, you’ll need to get another one.
With all that said, what do you actually need to do to get pre-approved for a mortgage? Please stay tuned for our next blog post on what documents you actually need in order to get a preapproval and some important considerations to keep in mind.
In the meantime, check out our resources for homebuyers and be sure to let me know if you have any questions!Posted by Greg Dewar on