Many banks and home mortgage companies promote prequalifying for a home loan to buyers. Additionally, many seasoned and well-established real estate agents will encourage homebuyers to get one before looking, or insist on one before taking on a client. A prequalification determines how much you may be able to borrow, and a price range for homes to consider.
If you are getting ready to start looking for a home, it is a good idea to go ahead and get prequalified for a home mortgage. While it is not mandatory, there are many benefits and many real estate professionals will insist on one. Here are some of the advantages:
Establish a Budget
One of the biggest advantages of pre-qualification is knowing how much you can afford. Many people spend time looking at homes they cannot get approval for. Prequalifying lets you know what your maximum payment is ahead of time. This way you can focus on homes within your range.
When you make an offer on a property, having a pre-qualification brings certainty to the home seller. You may not have the highest offer, but you do have leverage. The other person may have had an offer that was 2 or 3 percent higher, but no one knows if they are qualified for a loan. The highest offer is worthless if a loan is not approved, and the seller has just lost a sales opportunity.
Receiving final approval for a home mortgage is rarely easy. However, as a prequalified buyer. you will have already established a relationship with your lender. That doesn't mean hiccups will not happen, but it does reduce the possibility of surprises.
If you would like to talk more about the benefits of becoming prequalified for a mortgage, or need more information, contact a Door agent today!
To learn more about loans such as the difference between interest only and principal plus interest loans, click here.