So you have decided to make the big move and finally buy the dream home you have always been thinking of. And, yes, it can be a bit intimidating making your first home purchase as there is so much to know and it can quickly become very overwhelming.
Before starting to search for your dream home, it is always advisable to get pre-approved for financing from your lender or mortgage broker. This is a vital step in the home purchasing process, which should be done first before you begin to look for that perfect home.
As the name suggests, a pre-approved mortgage is when a financial institution or mortgage provider goes through the process of taking your credit application before you start shopping for a home. Based on certain qualification criteria, an amount is determined which the lender informs the client that they can borrow up to. It makes good financial sense to obtain a pre-approval as it gives you the peace of mind to confidently and comfortably start your home search. You will know what your budge is and not be disappointed by trying for a house which is not in your price range.
The benefits attached to getting a pre-approved mortgage include the following;
- 1. Just like each house is different and unique in its own way, there are a multitude of different mortgage products available in the marketplace. By looking into your mortgage financing earlier, this gives you plenty of time to shop the competition and ensure you are getting the best mortgage product, at the best rate that suits your needs.
- 2. Once you make an offer on a property, if you include a ‘conditional upon financing’ clause, you will have already looked into the financing as this process can take upwards to a week to ten days for final approval. In the event you didn’t get pre-approved and made an offer on a house subject to financing, you may have to settle for a less than ideal mortgage with a higher than normal rate and with inadequate terms.
- 3. A pre-approval allows you to ‘lock’ into an interest rate which is then guaranteed not to go higher for a period of at least 60 to 120 days, depending on the lender. Should the rates drop during the locked-in period, you get the benefit of the lowered rate. This provision gives you the peace of mind to shop for a house and not have to worry about the mortgage interest rates rising
- 4. A pre-approval gives you actual dollar figure of the mortgage amount you can comfortably afford so you don’t end up falling in love with a house out of your price range.
- 5. When you are ready to make an offer, and you have been pre-approved, you will be taken seriously and you will be in a better position to get the house versus another customer who does not have mortgage financing in place.
As we are in the midst of a sellers market, this means that there are more buyers out there and therefore, the perfect home for you may also be the perfect one for another family. In this scenario, it is more likely that a multiple offer situation may arise. This being the case, those clients who have been pre-approved for a mortgage are likely to fare better that those who do not. Your chances of getting the home that you want increase greatly with mortgage financing in place.
Take the time to complete this step and you stand to benefit greatly. Happy house buying!!