As you get ready to buy a new home, not only do you need to hire a REALTOR®, put your current home on the market and go to open houses, but you’ll also have to figure out where you want to move to if you don’t already have a specific area in mind—as well as pick a few alternative neighborhoods just in case for-sale properties are scarce or the homes are out of your price range in your preferred location.
So, when someone tells you that you should also find the time to get pre-approved for a mortgage, you may not be so susceptible to the idea, especially if you’ve never purchased a home before and do not yet realize why it’s a significant part of the home-buying process.
But there are many reasons why it’s important to get pre-approved for a mortgage.
- It pinpoints a price range. You should have a good idea about what your budget will be before you contact a mortgage lender, but getting a mortgage pre-approval can justify the budget you have in place or encourage you to reconsider it, because you learn how large a loan you would qualify for based on your financial history.
- It narrows down the neighborhoods you should consider. When you know your budget, you also know what areas you can afford. This will save you, as well as your realtor, a lot of time and energy because you can focus on the neighborhoods that are actually in your price range rather than areas that would ultimately make you house poor.
- It makes you look good to sellers. Most sellers want to say good-bye to their homes as soon as possible so they can move on. But motivated sellers aren’t going to like it if they need to wait for a buyer to get approved for a mortgage before a serious offer can be made or accepted. This means that the buyer still has to contact a mortgage lender, provide all the necessary documents to them for review, and then wait to hear the verdict. Sellers will appreciate it if you are pre-approved for a mortgage before you see their home because they can start negotiating with you right away.
- It speeds up the home-buying process. Another reason why it’s important to get pre-approved for a mortgage is because you can jump right into looking for a home. By receiving a mortgage pre-approval beforehand, you’ll have fewer major hurdles to overcome when you decide to make an offer. Plus, if you are not granted pre-approval right away, you’ll have ample time to get your finances in order so you can re-apply without missing out on a home you’re interested in. Just remember to get check back with your mortgage lender 90 days after you do get pre-approved because your credit history will need to be reviewed again to stay current.