5 Benefits of Getting Pre-Approved For a Mortgage
5 Benefits of Getting Pre-Approved For a Mortgage
Are you ready to purchase a home and get approved for a mortgage? Getting pre-approved for a mortgage is one of the best ways to make sure you get the home of your dreams; here are the seven benefits of getting pre-approved for a mortgage.
The home-buying process will vary from state to state, but North Carolina is one of the most buyer-friendly states in the country. Getting pre-approved for a mortgage will benefit you in many ways throughout the home-buying process.
Every mortgage will have a different timeline when it comes to the approval process. Typically, it takes anywhere from 30 days to several months to be approved for a mortgage in Raleigh, North Carolina. You have most likely heard the terms 'preapproval' and 'prequalification' interchangeably. Although these two are very different.
Getting pre-approval for a mortgage is used to show sellers that you are serious about buying their home. This will set you apart from the competition for those who do not have mortgage pre-approval. In order to get preapproved, you'll need to fill out an official application and provide the lender with financial documents. Then, they will run a credit report.
Pre-approval means reaching out to a mortgage lender before making an offer on a home. You will complete the mortgage loan application, have your financial documents verified, and have a loan approved, subject to the basic contingencies. As you search for your next home and debate getting preapproved, ensure you are aware of all the benefits.
Keep reading to learn the seven benefits of getting pre-approved for a mortgage.
Chapters
1. Faster Closing Process
Once you have found the perfect home, you will be through the hardest part of the home-buying process. However, you will most likely want to move into your new home as fast as possible. Getting approved for a mortgage and the entire closing process can be strenuous. If you aren't pre-approved, this process will be much longer.
If you have found a lender and sent in your financial information, you are one step closer to moving in. Going through the final approval process after this will make closing on a home much faster. Sellers typically appreciate this as well, as they are most likely eager to move into their next home.
Since your information is already in the lender's system, this will definitely speed up the closing process. Essentially, the faster the closing process, the more likely your offer to buy will be accepted. There is no reason why you shouldn't meet with a lender and obtain pre-approval before you start the house hunt. This is a long process, so it is best to be as prepared as you can be.
In addition, this helps you narrow the scope of the housing search. If you already know you can afford the home, then you don't have to waste any time during the closing process. Remember, a mortgage pre-approval does not guarantee that you'll get the loan. As long as there are no dramatic changes in your personal finances, you can assume that the lender will let you borrow what you need.
2. Become an Attractive Buyer
The number one reason people obtain pre-approved mortgages is because the sellers may be more likely to let them buy the home. Sellers will know your offer is valid, and the financing will not fall through.
If the other buyers are not pre-approved, your offer can be seen as more competitive because the seller knows you can afford the home. In a competitive market, any upper hand you can get will help tremendously.
There are two types of markets: buyer's markets and seller's markets. A buyer's market means the housing inventory is high and demand is low, which makes home-buying much easier. A seller's market means the housing inventory is low and demand is high; in this case, it is extremely hard to get the home you want.
In most cases, the market will go back and forth between these two types. If you need to move fast and the market is competitive then you should be trying to get every advantage you can.
In almost every situation, a seller will go with the buyer with a pre-approval instead of the one without one. This is because a buyer with a pre-approval is less risky and the deal is more likely to go through.
3. Better Understanding of Your Affordability
The entire home-buying process is long, and there are many hidden costs to discover. In the end, you may be paying a lot more than you originally thought. It is best to understand what you are working with from the start to know what kind of home you can afford.
Cost is the most important factor to consider when searching for a home. Budgeting can be difficult, and home prices vary greatly from state to state. Remember that you can still negotiate in real estate, but you can only do that if the seller picks you first. Your realtor and real estate attorney will want to use many tactics that may not include sales price.
Once you find the home of your dreams, it can be heartbreaking to learn that you cannot cover all the hidden costs. Once you put an offer on the home and the sellers receive this offer, that's when it is time for a negotiation.
While going over your budget, it can be helpful to do your research. Research the current market and area you're interested in. You can also hire professionals for inspections and appraisals. However, understanding most of it on your own will give you a better advantage in addition to getting pre-approved when making an offer on a home.
In addition, if you have a better understanding of your affordability, then you will have more time to find a house that fits your budget. This will also give you more flexibility on terms and pricing if you have a pre-approval. A pre-approval shows that your finances are in order and that you can undoubtedly afford the home.
4. You'll Learn About Potential Problems
In order to get pre-approved, the lender will review your credit history. This includes current gross income, assets, and debts. Before you get a credit report, you need to pay your debts, save for a large down deposit, and resolve inaccuracies on your credit report. All of this needs to be done before making an offer on a home.
Consider comparable properties nearby that are for sale. This is a great way to learn how much homes in the area go for and how much you will likely be spending. According to the National Association of Realtors (NAR), recent sellers sold their homes for 100% of the listing price, and 32% reported reducing the asking price at least once.
Bidding wars can seem intimidating, but if you want the home, then you need to understand your own credit history. You should know how much you can afford and where in your budget you may be having issues.
If you do find any issues, this will give you extra breathing room to fix any potential problems. You may find that you are spending too much money in one specific area, and this gives you the time to adjust. Any time or upper hand you can get will be extremely important once you put an offer down. The most important thing to do when searching for a home is to be prepared; a pre-approval will set you up perfectly.
5. Setting Your Budget
Having a mortgage pre-approval letter gives you more purchasing power as it demonstrates that you're serious about buying the home. There are many different types of mortgage loans and leaders; once you understand your affordability, you can set your budget and decide on a loan.
A pre-approval gives you some insight into the mortgage loan process and can take some of the stress off your shoulders. Setting your budget is essential throughout the entire home-buying process.
The housing market fluctuates constantly, no matter where you are interested in moving to. Sometimes, it is hard to find the perfect home at the perfect price, but as long as you can budget accurately, you have a better chance.
A pre-approval is used to help you get a home and help you understand how much you can afford. This includes your overall budget and what you will be able to borrow. This will allow you to skip over homes that aren't in your price range. The home-buying process is difficult enough, and you don't want to start by wasting time with homes you cannot afford.
Methodology
We used information and data from several different sources, as well as our own data, to determine everything you need to know about the benefits of getting pre-approved for a mortgage. Most of the data was sourced from the following sources:
- Credit.com
- National Association of Realtors (NAR)
FAQ: Benefits of Getting Pre-Approved For a Mortgage
Here are some commonly asked questions about the benefits of getting pre-approved for a mortgage.
Why is it important to get a mortgage pre-approved?
Getting pre-approved for a mortgage is a great way to ensure sellers know you are serious about buying their home. If you don't get pre-approved, then other buyers have a better chance of getting the home you want, as there is a chance that your finances are not in order.
Is there a downside to getting pre-approved for a mortgage?
Mortgage pre-approvals can lower your credit score by a few points because the lender will have to make a hard inquiry on your credit report. However, it typically doesn't drop very much and can be raised back up to where it was.
Can a mortgage fall through after pre-approval?
Unfortunately, pre-approval is not a guarantee for a home, as mortgages can still be denied, and real estate deals can fall apart. But this shouldn't stray you away from obtaining a pre-approval; it is still a vital part of the home buying process.
How long do you stay pre-approved for a mortgage?
Typically, once you have a pre-approval letter, your income, credit history, and interest rate can still change. A mortgage preapproval usually lasts anywhere from 60 to 90 days.
Is it better to be prequalified or preapproved?
Prequalification is a great first step; however, it usually doesn't carry as much weight as a preapproved one because your information has not been verified by the lender yet. Getting pre-approved will show the seller that you are serious about buying a home and give you the upper hand compared to other potential buyers.
Mortgage Pre-Approval Benefits - The Bottom Line
The entire mortgage pre-approval process may seem daunting at first, but it is extremely worth it. If you are interested in buying your first or vacation home, it is incredibly beneficial to go ahead and get preapproved for a mortgage.
Consider working with a real estate agent and a mortgage broker who can walk you through the complicated mortgage process and hopefully alleviate much of the stress. We want to ensure you get the home of your dreams with as few problems as possible, and this starts with mortgage pre-approval.
Before you buy your next home in North Carolina, feel free to contact one of our helpful real estate specialists, as they are eager to help you find the perfect home. We know that buying a home can be overwhelming, but a real estate agent can walk you through the entire process.
Ryan Fitzgerald
Hi there! Nice to 'meet' you and thanks for visiting our Raleigh Real Estate Blog! My name is Ryan Fitzgerald, and I'm a REALTOR® in Raleigh-Durham, NC, the owner of Raleigh Realty. I work alongside some of the best Realtors in Raleigh. You can find more of my real estate content on Forbes, Wall Street Journal, U.S. News and more. Realtor Magazine named me a top 30 under 30 Realtor in the country (it was a long time ago haha). Any way, that's enough about me. I'd love to learn more about you if you'd like to connect with me on Facebook and Instagram or connect with our team at Raleigh Realty. Looking forward to connecting!
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