Find an Agent
Mortgage Pre-Approval Letters And Why You Need One Before Looking for a House
If you’re a home buyer, actively looking to purchase a property and in need of a mortgage, then here are the five reasons why you should obtain the pre-approval letter before you start looking for a home:
1. It helps you establish what you can afford and which homes to consider in your search.
Once you've been pre-approved for a mortgage you can focus on searching for homes in a price range you can afford. It helps to make for best use of your time and your agent's time. Plus, it saves you from a disappointment of falling in love with a property that could be beyond your financial means.
2. You will need it when making offers - without it most sellers won't even consider your offer.
There is no better way to prove your creditworthiness than by producing a recently obtain mortgage pre-approval letter - ideally from a reputable lender. Unless you're buying a property from your close friend or a family member, the seller cannot relly on your verbal reassurance of your ability to buy their property.
3. Having all your paperwork ready, including the pre-approval, gives you advantage especially in a competitive seller's market.
You want to make a compeling case to the sellers why they should select your offer instead of another buyer's offer. Imagine the sellers receiving multiple offers at once - how can they know which buyer is the strongest and best qualified to purchase their property? When faced with such scenario, the sellers want to be able to compare the offers at hand side-by-side. They can only sell their property to one buyer. They will focus on the financial terms of the offers, but also on any contingencies, posession requirements, and the buyers financials. After all, they can't tell how well you manage your expenses, if you have good credit or bad, if you filed a bankrupcy in the past, or if you have any other outstanding mortgages and loans. However, if they can see that you have been pre-approved for a mortgage by a lender then they can feel confident about considering your offer.
4. Agents prefer working with pre-approved home buyers who are ready, willing and able.
If you ever reached out to an agent to inquire on a property, they probably asked you early into your conversation whether you have been pre-approved for a mortgage loan. Your answer to this question lets them know how serious you are about buying a property. Some buyers are simply looking around, without any real intent of buying a property, and they typically don't want to make the effort to get pre-approved for a mortgage. From an agent's perspective, working with unqualified buyers can be the equivelent of window shopping at the mall. If you want your agent to work tirelessly to help you in your home buying journey then you need to demonstrate your financial commitment to the process.
5. Lenders will typically pre-approve you for free but sometimes it could take them a few days to issue the pre-approval letter, so take care of it before you find that perfect home.
Most banks are not open on weekends, while most open houses are held on the weekends. Now, imagine walking to an open house and finding that pefect home you've been looking for! You're eager to make an offer right there on the spot. The only thing standing in your way? Having to wait till Monday so you can go to the bank to get the mortgage pre-approval, which then will take until Wednesday to be issued. By then that perfect home can already be gone!
There is simply no better time to obtain the mortgage pre-approval letter than before you head out to look at properties. Contact a reputable mortgage broker or a bank's loan officer to assist you. Your real estate agent may be able to refer you to local mortgage professionals that serve the particular market.
Browse Articles by Category
Opinions and Analysis
Real Estate News