When you’re buying a home, nothing is more important than working with a lender to determine how much your mortgage will be. You might look at tons of houses, only to realize that you can’t afford any of them – or even worse, that you can’t get a mortgage at all. Before you jump into the process of buying a home, consider getting preapproved for a loan.
Preapproval is different from prequalification because preapproval is based on your financial facts and history, while prequalification is just a general statement of your fitness for a loan. Having a preapproval letter from a lender says that you will definitely be able to get a mortgage at a certain amount. This letter is helpful in many ways, including:
- You’ll know how much home you can afford. You won’t have to guess to determine how much you’ll be able to spend on a house. You’ll have a statement from a lender telling you exactly how big your loan can be, which will help you stay realistic when you’re buying a home.
- It’s easier to negotiate with the seller. Being preapproved can give you something to negotiate with. The seller won’t have to wait to find out if you can buy the property – you’ll be able to prove your ability to purchase right away. Some sellers may take a slightly reduced price on the place if they’re able to close faster.
- You may be able to reduce closing time. Preapproval means you don’t have to wait to get approved once you’ve chosen a house. You’ll be able to skip that approval process altogether, which may speed up your closing by as much as a week.
- It reduces “nasty surprises.” Many first-time home buyers find a home that they love only to realize that they can’t get a mortgage for the amount of the property. Preapproval eliminates the shock of discovering you can’t purchase the home of your dreams after all.
Preapproval gives you tons of benefits in the purchasing process, from a speedier closing to a leg up on negotiations. As soon as you’re ready to get serious about buying a home, consider visiting your lender to get preapproved for a mortgage.
