Should You Get Pre-Approved for a Mortgage?

In short, the answer to this question is yes – getting pre-approved for a mortgage is a very important step in the home buying process. Let’s take a look at a few of the reasons to go through this important first step:

Getting Pre-Approved Helps to Manage Expectations

Suppose you begin your home search without being pre-approved for a mortgage and fall in love with a perfect “3 bedroom, 2 bath” home in your dream neighborhood. How will you feel if the house is listed at $400,000, but your bank says it will only give you $200,000? Having a pre-approval letter will ensure that you only see houses you can afford – meaning that you avoid the heartbreak of falling in love with properties that are out of your price range.

This benefit also translates to a time savings for you, the home buyer. Not only will you save time by avoiding houses you can’t afford, you’ll also save time once you’ve found a house you like. The entire process of buying a home involves back-and-forth negotiating with the seller, as well as several inspections, so it could be a major waste of time to go through the process for houses you won’t be able to afford in the end. By knowing how much you can afford ahead of time, you’ll be able to focus your energy and attention on the houses you know you’ll be able to buy.

Getting Pre-Approved for a Mortgage Will Give You More Negotiating Power

Being pre-approved for a mortgage also helps to increase the negotiating power that you bring to the home buying process as a buyer. For example, if you’re competing against another buyer who isn’t pre-approved, you can include a copy of your pre-approval letter with your offer. In this instance, the seller will be more inclined to accept your offer over the other buyer’s bid, as you can demonstrate that you have a guaranteed source of funds.

To begin the pre-approval process, contact the mortgage lender you’re planning to work with and request instructions on how to complete their mortgage application. This form can be quite involved, so plan for at least a half hour where you’ll be able to work on it undisturbed. You’ll need to provide personal information about yourself, your income, your current debts and the amount you’d like to be qualified for. You may need to reference current financial account statements in order to answer some of these questions, so be sure you have them on hand.

Once you submit this application – whether online or on printed paper – the mortgage broker will likely contact you to go over the information you’ve included. After the broker has received all of the necessary information, it will be submitted to the lender’s loan underwriting center to be approved. The underwriters will use set formulas to determine, based on your income, how much mortgage you’ll be able to provide. The broker will then provide you with this information, as well as further details relating to closing costs, in a pre-approval letter that you can take with you throughout the home buying process.

If you would like to learn more about the FHA Interest Rate, please go to the home page.

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Should You Get Pre-Approved for a Mortgage?

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