This is the first step in buying a home. In today’s real estate market most sellers will not consider an offer unless it is accompanied by a preapproval from a reputable mortgage company or bank. Also, as a home buyer you will not be frustrated by looking at home homes over what you can afford. This is heart breaking to find the perfect home only to find out it’s more than you can get approved for. A great Realtor will always asked if you are preapproved and will help you connect with a good mortgage company and loan officer. This step is the most important part of the home buying process.
Getting pre-approved for a home loan means that you have a tentative commitment from a specific lender for a home loan. In this case, you provide a home loan lender with actual documentation of your income, assets, and debts. This process could require an application fee as well, since the bank will run a credit check and work to verify all your employment and financial information. Once you are approved, the lender will give you a letter of commitment, stating how much money the lender is willing to loan you for a home purchase. With a preapproval for a home loan in hand you can start searching for your new home. Realtors and sellers will take you much more seriously when they see you have your mortgage funding in place.
It is important to understand, however, that even a preapproval for a home loan is not a guarantee that you will be approved for a mortgage loan. The funding will only be given when the property appraisal, title search, and other verifications check out on the home you have chosen to buy. Neither is the preapproval for a home loan binding; you can still obtain a mortgage from a different lender. If you do stick with the same company that preapproved you though, the application process will be much shorter once you find the right house.
Most buyers do not understand how important this process is. The single highest cause for a contract not to close, is due to the loan process. Start early even as much as 6 months ahead of when you want to be in your new home. This gives you time to correct misinformation, if found on your credit report or to save more funds for your down payment.
TO GET PREAPPROVED FOR A HOME LOAN