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Top 7 Reasons to Seriously Consider Home Loan Pre-Approval

06/04/2010
As you'll see in a moment, taking time to obtain home mortgage pre-approved has many advantages. Pre-approval is very different than pre-qualification, which is nothing more than qualification based on information provided by you verbally and not backed up with documentation.

Pre-approval requires you to complete a mortgage application and submit documentation that supports the information provided on the application. Your documentation and credit history are carefully reviewed and a decision whether pre-approval is granted or denied is then made. If granted, the mortgage lender puts in writing the interest rate and home purchase price for which you qualify. Attaching this letter to your offer gives you an advantage over other prospective buyers by showing the seller that your financing is already in place.

Here are seven more reasons to seriously consider home loan pre-approval:

7. When you're pre-approved, you can eliminate the time-consuming and stressful step of obtaining mortgage loan approval after you find your dream home.

6. You'll already be familiar with the lender's interest rate lock-in policy. Knowing when you're allowed to lock in the interest rate and for how long can save you money.

5. If you aren't pre-approved, your lender can explain why. Knowing in advance the reasons you weren't approved allows more time to correct credit report inaccuracies and other problems that caused your disqualification. Finding out you have problems when in escrow usually doesn't allow enough time to correct them. As a result, you may lose the opportunity to purchase the home or have to delay closing.

4. A lot of realtors require pre-approval before they'll begin showing to first time home buyers.

3. Obtaining loan approval takes a lot of time, especially in today's housing market. When you apply for pre-approval, you submit all required documentation in advance. By the time you start searching for a home, you're already ahead of the game so you may be able to shorten the amount of time it takes to close on the loan. A shortened escrow period could work to your advantage if the seller is anxious close.

2. Obtaining home loan pre-approval gives you more time to learn about the different mortgage options such as FHA home loans and VA Home Loans for which you qualify. The ability to calculate various mortgage payment scenarios allows you to make an informed decision about which mortgage product will best suit your needs and financial situation.

1. You'll know exactly how much you can afford to spend on the purchase of a new home. That way, neither you nor your realtor waste time looking at property that's outside your budget.

These are the top 7 reasons to consider home loan pre-approval.

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