For the majority of people, buying a home is the largest financial transaction they will make in their lifetime. While the process may be intimidating, understanding the the ins and outs can go a long way to help relieving stress. Let's take a look at one of the most important and often misunderstood steps of the process: mortgage pre-approval.
What is Pre-Approval?
Being pre-approved for a mortgage means that a bank or mortgage lender has reviewed your credit history and determined that you are a suitable candidate for a mortgage. A pre-approval is generally issued for a limited amount of time (usually 45 to 60 days), but it is vital to your home buying process. The pre-approval letter shows sellers that you are serious about buying a home and have taken steps to begin the process. As such, home sellers tend to look more favorably upon offers that have a pre-approval letter attached.
Does the Pre-Approval Guarantee You'll Receive Your Loan?
A pre-approval letter does not guarantee that you will receive financing from your lender. The pre-approval letter begins the process of receiving a loan, but there will be a more thorough review of your financial situation before your loan receives final approval. In addition, the bank will require certain information about the property you wish to purchase.
Besides giving you an advantage over other buyers, a pre-approval will also allow you to get an idea of what your monthly mortgage payments will be and shorten the final loan approval process. It is a vital tool in the home buying process, but should not be mistaken for a guarantee of financing.
For more help deciding which home mortgage is right for you, click here.
For more information on the pre-approval process or to begin your home search, contact a Door agent today!