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Reasons to Get Pre-Approved for Your Mortgage

Reasons to Get Pre-Approved for Your Mortgage

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru
Getting pre-approved for a mortgage is one of those rare things that offers only positives and no negatives. If you are thinking about buying a home, there really is no reason not to do it.  Getting pre-approved at the beginning of the mortgage process provides significant advantages to borrowers and also helps you avoid unfortunate surprises later on.

The pre-approval process focuses on your income, assets, employment history and credit profile.  Lenders want to determine what size loan you can afford an make sure that you can qualify when you actually apply for the mortgage.  Some lenders may request certain financial and personal documents to verify your income.  Most also want to know your credit score and if you have experienced any significant credit issues in the past.  In sum, the process is kind of like a dry run for when you submit your loan application.

After the lender  has reviewed all of your information, you should be pre-approved for a specific mortgage amount.  The lender should also provide a letter, email or online certificate that documents the pre-approval.  When you shop for homes, you can provide this document to property sellers or their real estate agent so that they know you are a legitimate buyer and ready to move forward with financing as soon as your offer is accepted.  Please note that pre-approval is for the borrower and not a specific property.  If you buy a unique or unusual property, that may affect your ability to qualify for the mortgage.  But in most cases, borrowers that are pre-approved are able to close their mortgage and buy the home they selected.

Below we outline the many reasons to get pre-approved for your mortgage.  The process is free, saves you time and money, provides greater certainty your loan will close, speeds up the mortgage process, makes you a more attractive buyer to home sellers and enables you to identify potential issues with your loan application before you apply.  Plus, there is no obligation for borrowers.  Continue reading to understand the benefits of getting pre-approved.
1

Certainty

Going through the process of getting pre-approved for your mortgage provides certainty that you will be able to obtain a mortgage to buy a home or refinance your mortgage when you want to. Through the pre-approval process, the lender reviews your personal and financial information, including your credit score, to determine your ability to qualify for a mortgage and assesses what size mortgage you can afford. Because the lender reviews your information in advance of you applying for the mortgage, you eliminate any disappointing surprises, such as a low credit score or high monthly debt preventing you from qualifying for the mortgage.

Understand How the Mortgage Pre-Approval Process Works

Additionally, you gain an understanding of the lender’s mortgage underwriting rules and borrower requirements so you know what to expect through mortgage processing and closing. In most cases, mortgage pre-approval is subject to the borrower finalizing his or her mortgage application as well as the lender’s review of the home purchase contract, property appraisal and other documentation required to close your mortgage.  So although getting pre-approved does not guarantee that your mortgage will close, it does provide a significant amount of certainty that you can obtain a mortgage.

2

Speed

Getting pre-approved allows you to move quickly when you find a property you want to buy or if you decide to refinance your mortgage. Because you have completed the initial borrower review process with the lender you reduce the time it takes to process and close your mortgage when you decide to move forward.

Additionally, it will help you get organized for the mortgage process including gathering the personal and financial documents required by the lender. In short, getting pre-approved puts you in the best position to close your mortgage as fast as possible.

3

Competitive Advantage When Buying a Home

If you are in the market to buy a home, getting pre-approved provides you a competitive advantage as compared to other borrowers.  From a home seller’s perspective, it shows that you are both qualified financially and serious about the home buying process. In a competitive housing market if multiple potential home buyers place offers to purchase a home, buyers that are pre-approved for a mortgage typically have an advantage over the buyers that are not.  Get pre-approved to give yourself the best opportunity to purchase the right home when you find it.

4

It’s Free

Getting pre-approved by a lender should always be free. If a lender attempts to charge you then you should work with a different lender.  From the lender’s perspective, pre-approving a borrower makes it more likely that the borrower will choose the lender for his or her mortgage. This means that the lender should be willing to put in the upfront work for free to develop a relationship with you so that you ultimately select that lender for your mortgage.

Use our free get pre-approved form to get approved and review loan terms from multiple lenders.  The form is easy to use, no obligation and getting pre-approved does not affect your credit score.

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5

No Obligation

Being pre-approved by a lender does not obligate you to work with that lender to obtain your mortgage.  We recommend that you continue to compare proposals from other lenders to find the mortgage that is right for you. It may be with the lender that pre-approved you or it may be with a different lender.  You may find a lender that offers a lower mortgage rate or closing costs in between when you are pre-approved and when you find a property that you want to buy.

Use our Mortgage Comparison Calculator to compare loans with different rates and closing costs

It is important to emphasize that you have absolute no obligation to select the lender that pre-approved you and you should select the lender and mortgage that best meet your needs. Although switching lenders requires you to start the process over, selecting a mortgage with a lower interest rate or fees can save you thousands of dollars.

6

Identify and Address Potential Issues

A key advantage of getting pre-approved is that it enables you to identify and proactively resolve potential issues with your mortgage application before you officially apply for the loan. For example, you may not realize that you have a credit issue that you need to address.  Or you may be missing important documents that are required to qualify for the loan.

Review Top Obstacles to Getting a Mortgage (and How You Can Overcome Them)

Finding and solving potential issues before you make an offer on a home helps eliminate surprises that can make make it difficult or impossible for you to qualify for a mortgage. Addressing these issues during the pre-approval process is preferable to addressing them after your offer has been accepted and you need to close your loan to complete the home purchase process.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

Sources

Mortgage Pre-Approval: http://myhome.freddiemac.com/buy/get-pre-approved.html

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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