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The Importance of a Mortgage Pre-Approval

Getting a pre-approval from your mortgage person is the first and most important step in the home-buying process.

When new clients contact me about finding a home, one of the first questions I ask them is:

“Are you pre-approved?”

I want to know if my new client has reached out to a mortgage broker or lending company and started the process of finding out a realistic and comfortable price range for their next home.

I’m going to take a few minutes explaining why this is one of the first questions I ask any new client, and how having a pre-approval right away not only gives you a great advantage of closing on a home but can make the home-buying process easier.

In today’s competitive market having a pre-approval ready is essential. When you as a buyer find a home that you love and want to place an offer, the seller will be expecting a pre-approval with your offer. Otherwise, how can they be sure your offer is even worth their time?

Don’t be misled by catchy ads promising pre-approvals in less than thirty seconds. Your pre-approval will take some time. Lenders have to confirm your income and check your credit before you’re pre-approved.

Scenario: Let’s say you don’t have a pre-approval prior to a showing you’ve requested. We go to the scheduled showing, and you love the place. A three-bedroom Colonial with a fenced-in yard, crown molding, and the seller is willing to throw in the orange shag carpet in the living room for free?!?!

This is your dream home! You want – you NEED to put in an offer right now.

So I go back to the office and write up an offer, and you go home and contact your friend’s mortgage guy who, by this hour, is out with his buddies watching the Sox game at the local bar and doesn’t have time to run your numbers right now. So the offer I’ve written up sits and sits and sits – unfinished until we confirm your spending power when your mortgage guy can finally run the numbers.

Meanwhile, there are three more showings at your dream home and should one of those buyers have a pre-approval and a strange but understandable affection for shag carpeting…well, then, you’re out of luck!

But… if you talked to your mortgage person two weeks before (when the Sox were on the west coast and not a distraction), you would’ve come to the showing prepared, knowing well your spending power, had your pre-approval and potential offer ready to go, and the shag carpeting would’ve been all yours!

Anyone who has bought a house over the last two years knows that any hesitation or delay in the process is a potential death sentence for any deal.

Shopping for a house is not like a trip to the grocery store. Nobody at the supermarket is going to bump you from the register and buy your bananas if you drop your debit card during the transaction.

But in the housing market, there’s always the potential for a better or comparable offer behind you. The simple step of getting a pre-approval can prevent any stumbles at the finish line!

Being prepared to purchase and close on a home is the most obvious benefit to getting a pre-approval, but it’s not the only one. Having a pre-approval shows you how much money a lender is willing to risk giving you, and sometimes the top end of your approval really isn’t affordable.

Remember that your pre-approval isn’t just a number range – it includes a multitude of factors including your credit score, anticipated down payment, etc., and your monthly mortgage total considers property taxes, your interest rate and insurance costs.

The pre-approval process allows you to see what your monthly mortgage could be at certain price points, which gives you the opportunity to see more accurately the month-by-month cost for your dream home. The quote “knowledge is power” is more than a quip when it comes to buying a home.

Using the pre-approval process to learn your true spending parameters can spare you the anxiety of wondering whether or not you can actually afford a particular home and will allow you to filter your searches so that you’re not wasting any time on houses out of your price range.

The home buying process is exciting and sometimes stressful, especially for first-time buyers. You have to absorb a lot of information at a seemingly lightning pace. But with preparation and an experienced agent to guide you, finding your dream home (dare I say one including an orange shag carpet), is not only doable but easy and painless.

If you have any questions, comments or concerns, feel free to reach out to me today. No matter what stage of the buying process, I’m always happy to offer my advise and assistance.

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Melanie Graham

Melanie Graham