Starting the search for a new home is an exciting time. Whether you are a seasoned home buyer or this is your first time, there are a few things to take care of before you start knocking on doors.
One of the first tasks on your to-do list should be seeing a lender for your loan pre-approval. Taking care of this significant hurdle will make the rest of the process much easier.
Suppose you are unfamiliar with pre-approval (or any part of the home buying process). In that case, the team of experienced agents at Nest Realty can help you navigate the unfamiliar waters of shopping for a home.
What is Pre-Approval?
When a lender grants a potential home buyer pre-approval, they are agreeing, in principle, to loan the buyer money towards the purchase of a home. The lender will put a maximum dollar amount on the pre-approval. This helps the buyer understand how much they can realistically afford to spend on a house. It is important to remember the pre-approval is not a finalized loan but a good faith agreement that a loan will most likely be approved.
How Do I Get Preapproved for a Home Loan?
Once you decide to move forward with the loan pre-approval process, your first step is to get your financials in order. A lending institution will need to look over employment and how much you earn along with your present loans and credit card debt. Your financial history, credit score and any loan defaults are also noted.
Use the information you have gathered to apply to the financial institution of your choice. Many lenders allow online applications for a home loan pre-approval.
- When you apply for pre-approval, a credit check is necessary. Too many credit checks can damage your credit score, so limit the number of applications for preapproval, or you run the risk of driving down your credit score.
- Pre-approval lasts for a short amount of time. If you are not seriously house hunting, do not get preapproval. Wait to speak with your lender until you are sure you are looking for a home in the immediate future.
Benefits of Having Pre-Approval Before You Go House Shopping
- Home Loan Pre-approval Sets Reasonable Parameters on Potential Homes – When you are house hunting, it is easy to become swept up in the excitement of finding your dream house. Falling in love with a too expensive home can lead potential buyers to great disappointment, or worse, unfeasible house payments. Your safest option is to pay attention to the maximum amount of money a lender offers and stay at that amount or a lower amount if possible.
- Pre-approval Allows You to Act Right Away – When you find a house you want, you do not want to risk losing out on the deal because you are waiting on financing. You already know you can move forward with a serious offer, and sellers appreciate the certainty of your offers.
- You Have More Leverage for Negotiating with Pre-approval – No matter how many offers a seller or their agent hears, the offers from pre-approved buyers are the ones that speak the loudest. In addition to having a greater stature, you can approach the seller with requests to lower the price. They will know what you can spend and may be willing to work with you if they know it will move the sale along quickly.
- Your Pre-approval Gives You Peace of Mind – Even in ideal circumstances, a great deal of stress can accompany buying a house. Knowing you are pre-approved and seeing your spending limits takes some of the pressure off of your shoulders since the application process is complete. You can also relax a little because your pre-approval will help the sales process go faster.
- You Will Not Waste Your Time – The idea of spending evenings and weekends looking at houses sounds more enjoyable than actually spending all of your free time looking at houses. The time you spend evaluating homes will be better spent because you can target the homes that fit into your budget. With a pre-approval, there is no guesswork, and you can zero in on what you can afford.
Purchasing a home can be a challenge no matter how well you think you have prepared. Having your home loan pre-approved will pave the way for a smoother overall home buying experience. Your offers will carry more weight, and sellers and their agents will be able to see that you are serious about doing business.
If you would like more information about home loan pre-approval or any part of the home buying or selling process, feel free to contact Nest Realty. Our experienced team can give you the information you need and walk you through the entire process from start to finish.