The mortgage process can be daunting for many, especially if it’s your first time buying a home. There’s a lot to consider – from your credit score to the amount of money you put down to neighborhoods and school districts, not to mention the size of the closets! But before you get overwhelmed with all the details, there is one critical step that if taken first can help the process before you even start looking at Zillow or working with a realtor – A pre-approval letter!
What is a Pre-approval?
A pre-approval is a letter from a lender that states how much you are approved to buy. In a seller’s market, this is very helpful as it shows a seller that a lender has done an in-depth analysis of your financial picture and that you are a sincere buyer. This also helps you narrow your search to a specific price range – so you only look at homes you can truly afford. The process involves having your credit score pulled, providing W-2s, previous pay stubs, and an overview of your assets and expenses to your lender.
How is This Different from a Pre-qualification?
A pre-qualification can give you a range based on what you verbally share and discuss with a lender, so you can have a general idea of what you could get a loan for. However, this isn’t validated so it carries a lot less weight when purchasing a home. It’s more like having a sketch on the back of a napkin of a home versus blueprints from an architect that show the whole picture.
Get Pre-Approved First!
Melissa Mason, Senior Mortgage Banker at HomeTown Mortgage recommends that customers start with a pre-approval before they do anything else.
“It’s best to have an idea of what you can actually afford before you start your home search. Imagine finding your dream home and then not getting approved for a loan,” says Melissa. “Plus, in this market – it gives buyers a leg up because they know the lender’s taken a deeper look at things.”
It’s important to note that getting pre-approved still does not guarantee a loan. Once you find your property, you’ll still need to submit an official application and go through the mortgage underwriting process until you receive final approval.
Then Search, Close, and MOVE!
With a pre-approval letter in hand, your realtor can then help you narrow your search to price and prioritize all the other things you want in your own home. Once you find the home for you, you’ll be able to move quickly.
“It may seem like a lot – but we walk you through the steps and make closing as easy as possible for you. Our underwriters are very quick and responsive so the process to get you in your home is very smooth!” Mason adds.