Why should I be pre-approved for a mortgage before looking at homes?

Another question that we hear sometimes from buyers, both first-time and first-time in 20+ years is ”why should I get pre-approved for a mortgage?”. You have a budget and have used the handy little mortgage calculator on your favorite home shopping website. Maybe you recently purchased a car or some furniture so your credit is good. We mean… what’s the big deal?  You know you can afford it, so why should it matter if you have been pre-approved?

Reason #1 to be pre-approved for a mortgage:

Know the numbers before shopping!

A great loan officer will not put the cart before the horse by quoting you payments without a full story. Truth is, several factors will affect your interest rate and payments including the down payment, mortgage type, credit scores, debt-to-income ratios, and of course, the market. Every one of these variables will affect your ability to be pre-approved for a mortgage and what the rate will look like in the event you find a house next week, get a purchase agreement accepted, and sign the lock agreement with the lender.

Reason #2 to be pre-approved for a mortgage:

You can shop with confidence!

Knowing you have the power to pull the trigger when that perfect house comes along gives you all you need to make a great decision at the right time. In the event you found that dream home, then had to wait until Monday to get pre-approved for a mortgage, you may lose out to a buyer who is already qualified. This is especially disastrous because after viewing several homes and finding “The One” you are back on the road hoping to find something almost as nice….

Reason #3 to be pre-approved for a mortgage:

The seller knows your offer is legit!

Picture this…..you have poured your blood, sweat, and maybe even tears into this home over the last 20 years. Now it’s time to move on since the kids are off to college or have started a family of their own. You spend thousands of dollars putting in new carpet and counter tops (wishing you had done the project a couple years ago to enjoy it yourself) and list your house with an agent. The sign goes in the yard and you tell all the neighbors and, low and behold, after several showings that week, an offer comes in.

The offer is a little off your asking price, but not bad though. They are asking for the kitchen appliances and the new washer and dryer downstairs and would like a general home inspection, and close 45 days out. Not bad. Where is the money coming from… it’s not cash right? Well, we were going to do that Monday and your agent has to share that with the seller… how would YOU feel in this situation? Not too inclined to jump on this offer and remove your home from showings, are you?

The only reasons you would NOT get pre-approve for a mortgage:

You are either paying CASH, in which case you would still need some type of proof of funds, or… you are not buying a house in the next 6 months to a year!

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