The Advantages of Loan Preapproval
Realtors® routinely suggest that consumers start the mortgage process and obtain a pre-approval letter not only before they make an offer on a home, but even before that process
begins. But do you know the difference between preapproval for a loan and being prequalilfied?
There are more advantages to gaining preapproval than you would initially surmise. When the
lender hands a borrower a preapproval letter, it means the borrower can:
Save Time by Looking at the Right Homes.
If your agent is sending you e-mail listings of available homes, you can ask to change the parameters to more tightly encompass the selection of homes that you are qualified to buy. Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you'll save time by checking out homes you can actually afford to buy instead of falling in love with something you can't. And by decreasing the inventory of homes to those that fit your parameters, you can allot more time to thinking about all the little nuances each home has to offer, such as whether your SUV will pass through the overhead space in the garage or if the fireplace is functional so you can cozy up on those cold nights.
Gain Confidence and Avoid Disillusionment.
Now when you find that perfect home, you won't have the worry of qualifying to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you.
Increase Bargaining and Negotiating Power.
Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that his/her home is sold. The seller can take the home off the market and place it into pending status with confidence.
Enjoy a Faster Closing Period.
Because there is no window period while your loan application is processed, the lender can move more quickly to closing. Appraisals can be ordered immediately. Often, a quick closing is important to a seller. If your are in the position to do just that, it will move your offer to the front of the seller's list.
Lenders will render a decision based on your complete loan application, your debt to income
ratio, employment verification and data from all three credit reports.
NEXT: SHOPPING