Why You Should Get Pre-Approved Before You Start Looking At Homes
Ideally, you should know if you have the financial means to purchase a home before you make an offer to buy it. One of the ways that you can determine if this is the case is to get preapproval from a lender. While getting preapproved doesn't mean that you're guaranteed to get a loan, it can help to define the parameters of your housing search.
Why You Should Get Pre-Approved for a Home Loan
One of the primary advantages of getting pre-approved is that you know how much a lender is likely willing to let you borrow. Knowing how much you can borrow can help to expedite your property search because you won't waste time looking at homes outside of your price range.
Depending on your credit score, income, or employment history, you won't qualify for a loan at all. Although this generally isn't the response a prospective homeowner wants to hear from a bank or credit union, it can help you take proactive steps to make yourself a more attractive borrower in the future. A lender will likely provide more information about why your request was denied and what you can do to overcome your current issues.
Tentative Approval Might Be Necessary to Submit an Offer
Another one of the key advantages of getting pre-approved is that it allows you to make offers on a wider range of available properties. In some cases, sellers won't allow prospective buyers to submit a proposal without proof of tentative loan approval. This signals to the seller that you have a good chance of obtaining financing in a timely manner, which increases the chances that the transaction will go through.
Why You Should Get Pre-Approved By Multiple Lenders
It's always a good idea to shop around when looking for a home loan. This is because each lender that you talk with will have its own criteria for determining your interest rate and other loan terms. Getting preapproved by various lenders allows you to better understand your options as it relates to obtaining a mortgage that offers the most favorable terms.
It's important to note that your credit score may go down by a few points because a lender will need to conduct a soft inquiry on your credit report. However, your score should rebound within months of the inquiry, and typically, you'll only be dinged once for all soft credit pulls conducted within a period of 14 days.
A home is generally the most expensive item a person will acquire in his or her lifetime. Therefore, it is important that you do whatever it takes to get loan terms that fit your needs and budget. Doing so can prevent you from becoming house poor or losing your home to foreclosure.