Buying a home is an exciting process. You may feel like you’re ready to jump right in and start looking at houses right away. But before you can start shopping, your realtor may require you to get preapproved for a mortgage. Here’s why.
What Is Mortgage Preapproval?
Mortgage pre-approval is the first step in the homebuying process. It’s when a lender has agreed to loan you a certain amount of money to buy a home. It specifies the loan amount, payback period, and interest rate. The lender checks your credit score, debt-to-income, and finances to verify your loan worthiness. Then, they give you a letter that verifies that you have gone through the process.
It’s important to understand that preapproval is different from approval. A preapproval is not set in stone. It’s simply an offer from a lender saying that they’d like to work with you. But if your finances change, they may not end up giving you the loan. Approval, on the other hand, is a firm commitment from the lender that is binding.
Why Realtors Require a Preapproval Letter
There are a few different reasons why realtors require you to get preapproved for a mortgage before agreeing to work with you. Not only does it show the realtor that you’re worth their time, but it also gives you the ability to make a stronger offer.
Tells the Agent You’re Serious
Real estate agents spend a lot of time driving around and showing homes to buyers. Many of them also are paid on commission only. Imagine spending hours showing houses to someone, only to find out they can’t afford to buy one. You’ve basically spent all that time working for free. No real estate agent wants to end up in that boat. There has to be a reason for them to devote their time to you, and a preapproval letter lets them know you’re serious.
Proves You’re Able to Buy the Home
Having a preapproval letter also gives you the ability to make a good offer on a home you’re interested in buying. Sellers are more likely to accept an offer when there’s proof that the buyer will be able to come up with the money. Otherwise, they risk not being able to sell the home if the deal falls through. Then, the home will end up sitting on the market for longer.
A preapproval letter may also give you a competitive edge. Other buyers may make the mistake of not getting preapproved before submitting an offer. If there are multiple offers on the home, the ones with preapproval letters are going to stand out.
All in all, it’s a better way to set yourself up for a successful buying experience.
Get Preapproved Today
Call Mortgage Solutions Financial to apply to get pre-approved for a mortgage today!