The importance of pre-approvals
Much of your ability to buy a home boils down to your ability to fund it. For many people, this is known as getting a mortgage. For most, having a pre-approval is your ticket to make an offer on a home that you love as the majority of us can not afford to buy a home in cash.
Listen to our recent Home Brew episode on pre-approvals and why it's your ticket to buying a home.
What is a pre-approval?
A pre-approval is a document created by a lender or bank that states that they have reviewed your financial standing and employment and believe you are qualified to purchase a home of a particular value. This is based on the financial institution lending you a certain amount of money and you making a downpayment on the purchase.
An example:
When to get one
If you are a serious homebuyer, getting a pre-approval is an early step in the process and should not be overlooked. It’s a simple prerequisite that sets the stage for your home buying journey. If this step is overlooked, you could find yourself wasting time investigating different homes that you might not get approved for!
At Nuhom, we once had a client earning well over the amount she needed to get pre-approved, but had no idea that she had missed a car payment on her Subaru a few months prior. This reduced her credit score to below 600 which severely impacted her ability to get the amount of lending she needed to buy the condo she really wanted.
Our client ended up having to utilize alternative resources as she had to get additional funding from her family (she even considered selling her current home, which was not what she wanted) and improve her credit score right up until a couple of weeks prior to the closing. It was a lot of unneeded stress but had she submitted for a pre-approval at the very outset of her home search, she could have set expectations and had more time to put together an effective course of action.
It gives sellers the confidence that you are serious buyer
When getting pre-approved you can also learn about the various mortgage options and the rates a bank or a lender can provide you. It helps you understand all of your options and let’s you set realistic expectations.
In order to make an offer you only need one pre-approval. Don’t spend time trying to get multiple pre-approvals before you have an accepted offer. By getting a pre-approval you’re not stuck with that one lender, you will have time after getting an accepted offer to shop around with other lenders if you choose to.
If you are using a mortgage, a pre-approval is imperative when it comes to making an offer. It sends a signal to the seller that you are a bonafide buyer and have wherewithal to make this purchase. Imagine accepting an offer without one? As a seller, you would not want to take this risk, so it is best to put your best foot forward as a buyer. Make yourself shine!
How to get a pre-approval?
In order to get a pre-approval, a lender will have to run your credit. Sometimes people fret at this step because they believe it could negatively impact their credit score. The impact it could have is often negligible and if any impact on your credit score, it would be temporary.
At Nuhom, we’ll help you buy what you want, but require a pre-approval on file. Ensuring you’ve vetted your ability to purchase is important… without this no seller will consider you as a serious buyer anyway.
Our preferred lender is Guaranteed Rate, but we also have plenty of additional great local banks and lenders to connect with.