When it comes to purchasing the right house, the search can be a long one to find the right mix of space, neighborhood, and price. With the market in Colorado Springs still dealing with a tight inventory, you need every advantage available to secure your next home before another buyer does. One of the key ways to beat out the competition is by having a pre-approval for a mortgage in hand. What are the benefits to receiving a pre-approval before you start home shopping?
Difference Between Pre-Approved and Pre-Qualified
First of all, you need to understand that pre-approval is different than being pre-qualified for a mortgage. Pre-qualification is a simple process, one that can be done over the phone or the internet. Basically, you give your lender information regarding your finances and your lender uses it to determine the size of mortgage that you could qualify for. However, your credit is not going to be included in the analysis at this stage, which could impact your interest and change the numbers regarding what you can actually afford in terms of a monthly payment.
There is a benefit to pre-qualification and that is the opportunity to discuss your needs with your lender. They can then lay out your options, and even give you reasons why one mortgage option might fit your needs better than another. At Elevation Mortgage, we do not issue pre-qualifications, nor do we encourage this. If you are serious about your home buying experience, we recommend getting a pre-approval. No real estate agent will take you seriously if you submit an offer with a pre-qualification.
Being pre-approved, on the other hand, is more involved. You complete a special mortgage application to your lender. During this process, your background and finances will be analyzed, including your credit score. At Elevation Mortgage, we go further by running your file through our automated desktop underwriter and validating all income, assets, and employment. We can also get a file fully underwritten (also called a TBD Underwrite) if the client is looking to purchase within 60 days. Afterwards, your lender can tell you exactly how much you are approved for in a mortgage loan.
Benefits of Pre-Approval
One of the key benefits is that you know exactly how much you must shop with, so you can look for homes within that budget right from the start.
Additionally, you already have an idea of the interest rate that you are going to be charged. Your lender may also be able to lock your rate. However, they may be some provisions as part of that process. Another words, you might have to close within a specific period to keep your locked rate. Check with your lender to determine your options regarding your interest rate and how to take advantage of the current low market rates.
It also is helpful when negotiating with the seller, because they can see you are already ahead of the game and have a mortgage lined up. Having a pre-approval can also make you more appealing as a buyer because they know you are more likely to close, versus someone that may still have to complete the process to obtain financing.
Plus, you save time because the lender has already completed their determination of your borrowing qualifications, allowing things to move much faster once you find a home to buy. Simply finish the application and the appraisal of your potential home, which will help you reach the closing table sooner.
Finally, you will have a list of additional expenses related to your mortgage before you make an offer. As you search for a home, knowing what your additional costs will be can help you to determine if you can tackle repairs on a potential home or not.
Clearly, there are benefits to you as a buyer in making sure that you have completed the pre-approval process. Doing so can signal to a seller that you are serious and ready to buy their home. If you are looking to get pre-approved, contact us to go over the lending options available to you.