Why a Mortgage Preapproval is Your First Step in Home Buying

Blog posted On September 07, 2023

Purchasing a home is one of the most significant financial decisions you'll ever make. Whether you're a first-time home buyer or you’ve moved between several homes, the journey can be both exciting and overwhelming. One crucial step that often gets overlooked in the excitement is obtaining a mortgage preapproval.

A mortgage preapproval is a preliminary step in the home buying process where a lender reviews your financial information to determine the maximum amount of money you’re eligible to receive for your loan. It involves submitting documentation about your income, assets, credit history, and debts. Once the lender reviews this information, they can provide you with a preapproval letter, which states the loan amount you can secure.

You should consider this the first step in the buying process. Whether you do or don’t get preapproved can significantly affect your experience. In this blog, we'll discuss the importance of a mortgage preapproval and how it can set you on the right path to a successful home purchase.

The Benefits of a Preapproval

  1. Gives you a realistic home buying budget

A preapproval letter serves as a realistic framework for budgeting and prevents you from falling head over heels for a property only to discover that it’s beyond what you can afford. This means you save yourself a headache as well as time in your home search. On the flip side, when you do see a home that’s within your budget, and you like it, you are free to make an offer.

  1. Shows sellers you’re serious, making your offer more powerful

With a preapproval, your leverage during negotiations receives a substantial boost. That’s because in the seller’s eyes, you’re not just browsing for a home, you’ve made serious steps to buy it and have the financial credibility to back it up. In that context, your offer will look stronger compared to others without preapprovals or whose maximum loan amount is lower.

  1. Simplifies and streamlines the mortgage process

Another benefit of a preapproval is that it streamlines the mortgage process. After your offer on a home is accepted, the groundwork laid down by your preapproval helps eliminate many of the documentation checks you’d need later. Since much of the financial evaluation has already been done, the final approval process tends to move quickly and easily. Sellers are aware of this front-loaded paperwork that a preapproval letter represents and it’s another reason for them to choose you over someone who hasn’t already done that work.

  1. Offers good insights about your financial health overall

Aside from the home purchase itself, a preapproval can also help to give you a clearer picture of your financial position. The process requires a deep dive into your credit records and financial history. During the preapproval process, you might discover financial issues you were unaware of or, at the very least, get a clearer idea of where you stand in relation to your longer-term goals. By identifying potential roadblocks early on you get the chance to resolve them, proactively.

How To Get Preapproved

An additional benefit is the simplicity of getting preapproved. It starts with contacting a trusted local lender. When you contact us, we can tailor the application and the overall home buying experience to fit your goals. However, to give you a general idea of what’s expected, keep these steps in mind:

  1. Gather Documents: You’ll have to collect your financial documents, including pay stubs, tax returns, bank statements, and any other information requested.
  2. Submit Application: Work on completing the preapproval application. Make sure to provide accurate and up-to-date financial information. Our online application process is quick, easy, and simple.
  3. Wait for Review: We will review your application and documents to determine your creditworthiness and the loan amount you qualify for. We offer extremely quick review times for most preapprovals.
  4. Receive Preapproval Letter: If approved, you'll receive a preapproval letter stating the maximum loan amount you can secure.

Following these steps means you’ll be well on your way to homeownership. Remember, a preapproval is not a commitment; it's a tool to guide you in making informed decisions while enhancing your chances of success. We can help you reach that success with personalized services, a wide range of loan options that work with your budget, and a seamless preapproval process that will give you the edge you need to make your homeownership dreams a reality. Contact us today to get started!


Source: CNBC, NerdWallet