Securing a mortgage preapproval should be #1 on your to-do list even before you search for a real estate agent. Getting preapproved for your mortgage is a crucial first step in the home buying process. Knowing exactly what your maximum home budget is upfront allows you to have a realistic conversation with a real estate agent about what price range to look in.
Doing this first also prevents you from wasting your time and the real estate agents time looking at properties outside your price range. Realistically, 99% of them won’t even show you any homes without first showing them your preapproval letter. It also shows them that you are a serious and prepared buyer.
A preapproval is a conditional commitment from a lender to loan you a specific amount of money, giving you a clear picture of your purchasing power.
To get preapproved, you simply need to complete an application and provide us with the requested financial documents like tax returns, pay stubs, and bank statements. We will then pull your credit report and also verify your income and assets.
Based on this (financial picture) information, we will be able to determine the maximum loan amount you qualify for, the potential interest rate, and the types of loans you may be eligible for.
Having a preapproval letter in hand streamlines the home buying experience. It allows you to focus your search on homes within your price range, helping to prevent you from falling in love with a property that may be out of your price range.
When you do find a home and are ready to make an offer, the preapproval letter gives the seller confidence that you can secure financing, making your offer much more appealing. This is especially important in competitive markets where sellers might receive multiple offers.
A preapproval letter is a more thorough process than a simple prequalification, which only provides an estimate of what you can borrow.
A prequalification is merely a general estimate based on an informal conversation about your finances, while a preapproval involves a detailed review of your financial history.
By getting preapproved, you get a solid, lender-backed number that gives you and your real estate agent a much more accurate budget to work with.
In summary, the best way to start your home buying journey is by getting preapproved for a mortgage loan first.
This critical step provides you with a clear budget, gives you a competitive edge when making an offer, and ensures that you and your real estate agent are on the same page from the very beginning.
Getting preapproved first will set you up for a smoother and more successful home buying experience.
