Buying a new home can be a very complicated and stressful process. One of the most important steps of the home-buying process is getting mortgage pre-approval. Mortgage pre-approval, which will be provided by your mortgage lender, will give you a number of different insights and amenities, which will help to make the mortgage origination process easier.
Makes Offer Stronger
In today’s real estate market, which is becoming more and more competitive, having a pre-approval letter is very important. When you make an offer to buy a home, one of the first things that the seller is going to ask for is a pre-approval letter. The pre-approval letter will discuss the type of financing you will likely have, including giving the seller comfort that you will receive enough of a loan to finance the purchase. In some situations, the seller’s realtor will also call the mortgage lender to confirm a few additional details.
Gives Financial Insights
One of the most important parts of the pre-approval process is that it will give you much better financial insight. A mortgage lender will start the pre-approval process by asking you a range of questions about your income, other expenses and other financial situations. The mortgage lender will also pull your credit score, which will then be provided to you. Based on all of the information that it receives and reviews, the mortgage lender will be able to provide you with an estimate of how much home you can afford, what the interest rate and monthly payment will be, and what the likelihood of approval will be. This can then help to provide you with a guide as to what your total approvable budget is.
Sets Mortgage Expectations
While the pre-approval letter will provide you with a high-level look into how much of a home you will be able to afford, it will also provide a number of different caveats that will be required in order for the loan to close. The pre-approval notice will mention that the loan will need to go through further underwriting and analysis before it can be closed. This will include receiving and reviewing all of your personal financial information, reviewing an updated credit report prior to loan closing and receiving a number of updated third-party reports, including appraisals and property condition reports. The letter will also give an estimate of timeline for how long it will be before the loan can close.