If you want to buy a home, you’ll join the other 65% of Americans who own their primary residence according to Realtor.org. But first, you’ll need to know how much you can afford and how much the lender is willing to approve for a mortgage loan.
Here’s everything you need to know about buying your next home.
What Is a Pre-Approval?
Obtaining a mortgage pre-approval is the first step towards buying a home because it sets the price range of the home you’re going to buy and it gives you an idea of what amenities you can afford. In a nutshell, it’s the starting point in the homebuyer process. According to Investopedia, it “means the lender has actually checked your credit and verified your documentation to approve a specific loan amount. Final loan approval occurs when you have an appraisal done and the loan is applied to a particular property.”
Why Do Homebuyers Need One?
A pre-approval is needed for two main reasons: 1. To give homebuyers an idea of how much a lender is willing to give them in a mortgage loan amount so they can start shopping for a new home and 2. Because most sellers want to see a pre-approval letter with an offer to purchase before they accept.
It’s always smart to get a mortgage pre-approval before you start shopping for a new home and visiting open houses. Why? With it, you’ll know the approximate price of the home you want to buy and can start shopping. Without it you won’t know how much the lender is willing to give in a mortgage and may be wasting time looking at homes out of your price range.
How to Get Pre-Approved
Getting pre-approved for a mortgage loan is very similar to applying for other financial products such as credit cards. A full credit assessment will be done and the lender will give approval based on your credit worthiness as well as your capacity.
Here’s the information you’ll need:
- proof of income
- proof of assets
- consent to a credit check
It’s a good idea to contact one of the three U.S. credit bureaus to check your credit report and score before making an appointment with a lender. This way if there is any incorrect information being reported you can correct it before going to the lender.
If you’re ready to take the first step towards becoming a homeowner, contact BrightPath Mortgage to learn more about getting a pre-approval. We’ll help you be on the way to buying your next home.
Photo source: Pixabay