As a homebuyer, you probably have heard the word “pre-approval” more than a few times. But what does it mean to be pre-approved for a mortgage? How important is it? In this article, we’ll explore the advantages.
Prequalification vs. Pre-Approval
First, it is important to differentiate between prequalification and pre-approval. Prequalification is informal. You provide some information on your finances, and the prequalification tool estimates what you might be eligible to borrow.
Pre-approval, on the other hand, is formal. When you get pre-approved, your lender provides a letter which summarizes your financial situation and what you can afford.
- Know what you can afford. In fact, the first major reason to get pre-approved is to find out what you can afford. Prequalification can give you an estimate, but again, you want the most accurate assessment possible. Because pre-approval is a formal process, you can rest assured that the estimate you are looking at is as close to accurate as you’re going to get at this stage. With that information on your side, you can direct your search for a suitable, affordable home with greater precision. The less time you waste looking at properties which you cannot realistically afford, the faster you will find the home which is right for you.
- Increase your bargaining power. If you find the perfect house and you do not have pre-approval yet, you probably are not in a good position to make an offer. While some sellers may consider dealing with buyers that do not have pre-approval, many will turn them away automatically. If that happens to you, by the time you do get pre-approval, you may discover that the home you are interested in already sold to another buyer that was more competitive than you. This can be a huge disappointment, especially if you have your heart set on a house. But you never have to miss out on an opportunity in this fashion if you get pre-approved before you begin contacting sellers. When you do that, sellers don’t have to wonder whether you will qualify for a mortgage or not. They can feel comfortable moving forward with the transaction without worrying that it will fall through at the last minute.
- Close rapidly. Closing times can vary dramatically between different mortgage companies and situations. But in general, we can say that it is possible for pre-approval to potentially cut weeks off the closing process. This is yet another reason why sellers are more likely to consider you if you are pre-approved then if you are not. And if you are on a tight schedule, it obviously plays to your advantage as well. The faster you can close, the sooner you can move into your new home.
Get Pre-Approved Now
If you are ready to find out how much home you can afford and enhance your bargaining power as you shop for a home in Alabama, give GoPrime Mortgage a call at (205) 495-0313. We can get you pre-approved fast so you can move into your new home as soon as possible.