The home buying process can be overwhelming and difficult to navigate. Often, new home buyers don’t even know where to begin. A good place to begin is with your finances. A smart buyer will head to their bank or mortgage loan officer to find out how much house they can actually afford before even touring that first open house. Once you’ve talked through your finances with a mortgage company or bank, you can get a Pre-Approval letter that states how much the bank or mortgage company is willing to lend you. There are plenty of benefits of a getting a Mortgage Pre-Approval Letter:
1) Negotiating power. A Pre-Approval letter offers sellers proof that you’ve done your homework and you are serious about buying a house. Depending on the market, this can give you power to negotiate on other elements of the house, such as the price, repairs, or closing date flexibility.
2) Win a multiple offer house. If you’re in a market where sellers have more power, your pre-approval letter will show the seller that your financing is secured and help you win the bid. When you turn in your pre-approval letter with your offer, your offer looks more attractive than a potential buyer who does not have pre-approval for a mortgage. In extremely tight markets, sellers will not even look at an offer without that pre-approval letter, so take the time to do the financing work upfront, especially in a seller’s market.
3) Target your search. If you know how much house you can afford, it makes the process of searching for and buying a house much simpler. You won’t waste time touring houses that you simply cannot afford or that are way below your budget and standards.
4) Close quickly. Buyers who have already turned in paperwork to a bank to obtain a pre-approval will get a faster closing date than buyers who are just starting the mortgage process.
5) Lock in an interest rate. Interest rates are fluctuating right now and are likely to go up based on the latest Fed guidance. If you obtain a pre-approval from a bank, you can lock in a mortgage rate to ensure you get the best possible rates available when you close.
No matter what your reasons, get your financing in place as early in the buying process to make your purchase and closing process as simple as possible.
Enjoy the Adventure!