How and Why You Should Get Pre-Approved for a Mortgage
Buying a home in the Ocala, FL area is an intricate process. We all want to own our dream house, but at the same time, we don’t want to go over budget. This is why getting pre-approved for a mortgage is so vital to the home buying process. By talking to local mortgage lenders and seeing how much they are willing to lend you, it gives you a snapshot as to how much you can afford. It provides you a price range of homes that you should be looking at, helping you narrow down your home search.
To weigh the importance of a pre-approval letter, consider this information:
What’s the Difference Between Pre-Qualified & Pre-Approved?
Getting pre-qualified for a home loan is usually the first step any home buyer would take. It’s a time where you might talk with a lender about which mortgage loan options are best for you, while pulling your credit report at the same time. In essence, it’s an overview of your credit and gives you a high-looking picture of your financial situation.
Becoming pre-approved for a loan is a more formal process, where you provide a lender with certain documents (like taxes, etc) and they approve you for a certain loan — which is generally good for 60-90 days. Additionally, your lender will thoroughly investigate your financial background and give you a ballpark estimate of the interest rate you might face for certain loans. In total, it paints the picture for how much you can afford.
Why Should I Get Pre-Approved for a Mortgage?
As I mentioned previously, the biggest benefit for getting pre-approved for a mortgage is that it shows you how much home you can afford. By carefully examining your finances, budget, and interest rate on the loan, you can easily calculate how much money certain houses will cost you every month. (No one wants to buy a house they can’t afford and one that might put them in a foreclosure situation.)
A secondary benefit to getting pre-approved for a loan is that it helps during negotiations. Showing the seller that you are pre-approved to buy their home and that you can afford it is a positive sign to them. And it certainly helps during negotiations when multiple offers have been put on the home. It gives you the buying edge.
How Do I Get Pre-Approved?
The process is really simple. You’ll need to sit down with a mortgage lender and provide them with financial documents. After that, they’ll run a credit check and evaluate your finances. Once done, they’ll talk to you about mortgages you qualify for and they’ll provide you with a letter showing you an estimate for the interest rate and loan.
First, go online and search the best interest rate for the kind of loan you prefer. Then contact that lender for pre-approval.
By having done all your pre-qualifying steps, this process should be short and relatively painless, since you’ve already found and corrected any possible problems.
What Documents will I Need for Pre-Approval?
Documents vary from one lender to another. Along with the loan application, generally you’ll need items such as a paystub and W-2. If self-employed, you’ll probably need several years’ tax returns.
In addition, you might need to show several months of bank statements. Also, your credit report and credit score will be pulled and carefully examined.
Upon acceptance, your pre-approval letter should be good for 60 to 90 days and indicate how much you’ve been approved for. Hopefully, the lender will allow you to lock-in the agreed upon interest rate for a set period of time.
What if I can’t get Pre-Approved?
If you can’t get pre-approved, don’t worry. First, ask the lender why they won’t approve you. They’re required by law to tell you the reason for denying your approval. Once you know the exact reason, you can then work to correct that problem. Once corrected, you can reapply and should be approved, providing everything else has remained basically the same.
Buying a Home in Ocala, FL
The home buying process becomes easier as you get pre-approved for a mortgage loan. Not only does it provide you with information on how much you can afford, but also gives you a bargaining tool. To make sure you get the best deal, it’s best to start talking with a local real estate agent or lender today. The market has made a turn for the better and rates are expected to go up throughout the year. Contact us and see about getting pre-approved for a mortgage today!