Pre-Approvals Help Homebuyers
Mortgage pre-approval will tell you how much you can borrow. It makes buying a house easier, but you shouldn't put your entire faith in it. There're pitfalls to watch out for - your mortgage guarantee can be revoked, and being pre-qualified isn't as good as pre-approved.
Why To Pre-Approve Your Mortgage
Pre-Qualified vs. Pre-Approved
Some lenders won't verify your financial credentials when you ask for a mortage guarantee. If you meet their general criteria they will only pre-qualify you for the financing, conditional on later approval.
What you'll receive is a simple initial assesment which doesn't have much weight to warrant your loan. However, if you are pre-approved instead of pre-qualified chances of having your financing secured are much better.
That's because a pre-approving lender will actually run a credit check on you, and ask to see all paper evidence which may be necessary to evaluate the status of your employment, income, assets and debt load.
This will reduce your risk of being denied a proper financing when it's time to close the purchase. On the top of that, if you know your price limit you may fine-tune your home buying decisions.
Advantages of pre-approval which a vague pre-qualifier doesn't have are undeniable. So, when you talk to lenders request a thorough pre-approval.
If they can't offer it to you, just seek your mortgage somewhere else. Once you have it pre-approved you can be certain of making a good step towards buying a home.
Mortgage Amount Can Change
When your offer of purchase is accepted, you'll have to apply for a mortgage and the lender will request an appraisal. These two events may have an impact on what you'll actually receive.
Your pre-approved amount is the maximum which you can borrow. It'll strech your budget to the limit. A cautious homebuyer would look at it from a wider perspective since paying off a mortgage most often takes a very long time.
It's a good idea to search for a home at a lower price, so you can include in your budget future plans, and have some safety margin for unexpected events.