29 Oct Why You Should Get Preapproved for a Mortgage
Want to buy a home? If you’re serious about it, you should get pre-approved for a mortgage. With the stricter requirements of the mortgage industry, getting pre-approved is quickly moving past the “optional” label and becoming a necessary step in the home buying process. Whether you are thinking about Community Development Corporation of Utah’s HomeFit™ Mortgage or any other mortgage program, here are a few reasons you should get pre-approved.
- You need to know how much house you can buy.
Shopping for a home before you get pre-approved is a lot like going into a department store without your wallet. You simply don’t know how much you can afford. Through the pre-approval process, you’ll get an accurate idea of what size loan the mortgage company is willing to offer you. This way, you can make sure that you’re only looking at houses that are actually within your price range.
Many people judge how much home they can afford based on what their friends and families have been able to accomplish. A recent survey from NeighborWorks America found that nearly 40% of people thinking about buying a home get advice from friends and family first, and only 9% approach a mortgage lender. Although getting advice from friends and family that have gone through the home buying process is helpful, we recommend speaking with a professional.
- It proves to real estate agents and sellers that you’re credible.
Many real estate agents and sellers won’t even look at your offer if you don’t have a pre-approval letter attached to it. The pre-approval shows you’re serious, and that you are a credible buyer who will be able to move fast when you find the home of your dreams and want to buy it. The pre-approval letter proves that you, as the buyer, have already done your homework and are ready to buy.
When you get pre-approved, you have to provide a lot of documentation such as pay stubs, W–2 forms for the last two years, your last two federal tax returns, and two months’ worth of bank statements for all of your financial accounts, along with your credit report. Taking the time to compile this information and submit it shows initiative, and that’s respected by both the real estate agent and the seller.
- It can make you stand out in a competitive real estate market.
The real estate market is getting more competitive every day, and when you find the perfect house you want to make sure your offer stands out. Getting pre-approved will do that, even though the letter doesn’t guarantee that your offer will be accepted by the seller. Most real estate agents won’t even look at an offer without the pre-approval letter.
If you make an offer without a pre-approval, your offer may not be taken as seriously as an offer from someone else who has gone through the process. Sellers don’t want to wait around for the mortgage negotiation to finalize, so they look for buyers who have already completed most of the work to get the money in hand to close on the house.
Maybe you aren’t quite ready to speak with a lender about getting pre-approved. That’s OK! Community Development Corporation of Utah’s Homeownership Pathway is designed to help you work towards homeownership no matter where you are in the process. Our homeownership counselors can help you identify what you may need to do in order to get mortgage-ready. Homeownership advising is FREE, so contact us at 801-994-7222, or fill out an online inquiry form today and get started on the pathway to homeownership!