When you first begin shopping for a home, your real estate agent will encourage you to look into the financial side of things as well. They may even ask you to get pre-qualified or pre-approved for your mortgage. What's the difference between the two? A pre-qualification basically means that a lender has looked over your finances and is fairly certain they can approve you for a mortgage. A pre-approval means that you've already been approved for the mortgage. The latter is better. Following are four reasons why.
Know Your Budget
When you get pre-approved, your lender will tell you how much you can spend. Let's say you get approved for $150,000. You will know not to look at homes in the $200,000 range because you won't be able to get a loan for that much. A pre-approval also gives you a general idea of what your payment is going to be while your shopping for a home, so you can stay in your comfort zone payment wise.
Alleviate Unnecessary Stress
Shopping for a home is stressful. The most stressful part is, perhaps, finding a home you love and waiting on the mortgage company to tell you if you can buy it or not. If you're pre-approved, however, you can alleviate all of that stress. You already know that you can purchase the home. The only thing you have to worry about is getting the seller to accept your offer.
Get the Lowest Rate
When you get pre-approved, you can lock in your rate, which will help you immensely if rates rise during your search. A difference of 1 percent in your interest rate can cost you tens of thousands of dollars over the lifetime of your loan if you finance $150,000 for 30 years at a fixed rate. That's a lot of money that you could be saving for other things.
Beat the Competition
Competition for homes in some markets is fierce. If you want to compete in a tight market, you have to make yourself attractive to sellers. Sellers are more likely to sign a contract with a buyer whose financing they are sure will go through. Since you can show them you've already been approved for the loan, they will know you'll be able to follow through with the purchase.
As you can see, there are several reasons why you should get pre-approved for your mortgage before you begin shopping for a new home. It makes you a smarter shopper and will help you beat the competition for your dream home.
For more information about home mortgages and how to get pre-approved, work with a lender like TruPartner Credit Union.Share