If you are a first-time homebuyer, one of the most important steps in the process is obtaining mortgage pre-approval. You should do this before you begin house hunting so that you will know exactly what your budget it. You can obtain mortgage pre-approval either online or in person. Let’s take a look at some of the benefits of mortgage pre-approval.
Takes Out Guesswork
Going through the mortgage pre-approval process takes out the guesswork and doubts as to whether or not you are in a financially stable place to purchase a home. This will give you a better overall picture of what kind of mortgage you can take out.
Helps You Determine a Budget
With a mortgage pre-approval, you can determine what price range of homes you can afford. There is nothing worse than falling in love with a home only to find out it is out of your budget. On the other end, you may think your budget is lower than it could be and you could miss out on your dream home.
You Appear Strong as a Buyer
A seller’s biggest fear is that the sale of their home will fall through due to financing issues. Having a mortgage pre-approval will help you appear as a solid buyer who is fully capable of satisfying all aspects of the purchase and sales contract. Sellers are much more likely to accept offers from buyers who have gotten pre-approval for a mortgage. When the market is hot and there are multiple offers on a home, you can count yourself out of the running if the other buyers have mortgage pre-approvals already and you don’t.
Better Negotiation Ability
Buyers who have mortgage pre-approval can generally negotiate better terms and pricing than buyers who have not received pre-approval.
Once you are under contract, having a mortgage pre-approval can help streamline the closing process, since a lot of your financial information will already be in the lender’s system. In today’s housing market, many sellers are requiring that mortgage pre-approval letters be included with any offers made on a home. Not only does this step help you determine a budget and present yourself as a strong buyer, but it will also help the process run more smoothly and quickly once the home is under contract.
Things You Need to Gain Pre-Approval
Proof of Income – W2 statements from the past few years, recent pay stubs, two most recent years of tax returns
Proof of Assets – You will need to present bank statements and investment account statements to prove that you have the money for a down payment and closing costs, as well as cash reserves
Good Credit – Most lenders will require a score of 620 or higher to approve a conventional loan and some even require that score for an FHA loan. Lenders will offer lower interest rates for customers with scores of 760 or higher.
Employment Verification – Your lender will likely call your employer to verify that you are still employed and will verify your salary. If you have recently changed jobs, your lender may call your previous employer as well.
Other Documents – Your driver’s license, social security number, and your signature will be needed to pull your credit report.
Think you are ready to take the plunge and find your perfect home? Give Raymond Maestas a call today! We’d love to hear from you.