subject: Reasons Why You Need To Get Preapproved For A Home Loan [print this page] When it comes to purchasing a new home, one of the most crucial steps in the process is to get preapproved for a mortgage loan. Since the home loan industry is constantly changing underwriting guidelines, it is hard to know if you are approved for a mortgage without completing an application. By getting preapproved for a home loan upfront, you are taking the guess work out of the equation.
Many Realtors want to know that their clients are qualified for a mortgage loan before starting the house searching process. Some Realtors go as far as not working with any client who is not preapproved first. It is crucial for the future homeowner to know that getting preapproved first is the most important step in the home purchasing process.
Why get preapproved first? For starters, completing a loan application will let you know where you stand now. If there is a credit error, you still have time to correct the issue. A preapproval will also let you know what down payment is needed, what your monthly mortgage payment will be and the maximum sales price of a property you qualify for. These are important things to know when looking for a home.
Credit Issues
Most people do not know what items are on their credit report until it is too late. By completing a mortgage application first, if there is any negative or incorrect information on your credit report, you will have time to repair the mistake. Many credit repair companies take up to 45 days to correct inaccurate information. It can take up to 3 to 6 months to get all three bureaus to update with the correct information, so by starting the preapproval process first, if there is a mistake, you will have time to fix the problem.
Know Your Down Payment Requirement
A preapproval will let you know the required down payment to buy a property. Since there are many different home loan programs from FHA home loans to conventional home loans with each requiring a different amount for a down payment, it is important to know how much money you will need for the house closing. This will also give you time to prepare for the closing by saving money for the down payment.
Know Your Monthly Loan Payment
Preapprovals also give you an idea of what your monthly home loan payment will be. This will help you set up a budget and prepare for the house payment. Also, a home loan consultant can assist you with loan options that can affect the monthly payment.
Know What Your Can Buy
The most important part of the preapproval is knowing how much you can buy a home for. You need to know what the maximum sales price of a home you qualify for. This way, you only are looking for homes that meet your budget.
Let The Seller Know You Are Serious
By getting preapproved for a mortgage loan upfront, you are letting the seller know you are a serious buyer. If there are two offers to buy a home and one offer has a preapproval letter, the seller is most likely going to accept the offer with the preapproval letter. By being a preapproved buyer, you set yourself apart from those that wait until the final moments to get approved for a home loan.
By talking with a mortgage specialist and getting preapproved today, you will have a better understanding of where you stand in your house buying process.
