Posts Tagged ‘home buying finance’
How Important Is Getting Mortgage Pre-Approval?
Generally, any finance professional would tell you that the reply to this question about the importance of getting pre-approved for a mortgage should be a resounding “yes”. There are many important factors to consider when buying a new home and this is, perhaps, if not the most important, then at least one of the first steps you should take. I’ll lay out why this is so in the next few bullet points.
Why you should go through the mortgage pre-approval process:
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It creates an air of trust between you as the home buyer and the seller. If your finance is in place and has sealed approval with a pre-approved mortgage letter from your lender then the seller can rest assured that you are serious and can afford the price being asked. Imagine competing with folks who are not pre-approved. You are very likely to come out as the trusted party.
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The same quality of trust with an approved / guaranteed mortgage also gives you improved strength of negotiation. You will be in a much better position to negotiate on the price of a new home than somebody who doesn’t have the assurance of funds behind them.
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Another reason for looking at securing mortgage pre-approval is for the sense of reality it will create. You won’t be looking above your means at a 5 bedroom home with swimming pool and harborside views if your reality has been kept in check by the amount of your pre-approved mortgage letter. This can help to dissuade misguided, time-wasting home viewing that are totally unrealistic. Of course, it’s great to dream, but home buying is a serious business when you’re in the middle of it and it’s best to maintain a cool head.
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The pre-approved mortgage process will save you money. If you think you can negotiate a seller down and it doesn’t pan out, you don’t want to have spent your hard-earned cash on home inspection fees and the to and fro of negotiation. Better to focus your energy on something that isn’t a pipe dream.
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It will keep you sane and save you stress and energy – you’ll be able to concentrate on realistic homes that you can truly afford and choose the best one that keeps you within your means.
Of course, none of this is necessary, but these are proven and prudent steps that will reduce the stress and help your management and the process of buying your new home, while keeping the whole show within your grasp and power. If you are a maverick whose gift in life is talking people into the impossible, then by all means go down the route where you don’t have the strong back-up of a pre-approved mortgage letter. IMHO, the key to buying a new home is to have a plan (and that has to include the finance plan written down in black and white). When you have that in place, the whole home-buying process becomes so much easier. Good Luck!
You can find a how-to guide on mortgage pre-approval and a sample mortgage application here.
