A mortgage pre-approval is a statement from a lender that says you are qualified to borrow up to a certain amount. It also includes a specific pre-approved interest rate, though this number can change depending on how soon you put in an offer on a home since mortgage rates are variable. To come up with the promised loan amount, lenders take into consideration the same factors they would consider for a traditional mortgage approval, including your debt to income ratio and your credit score. The better your financial situation looks, the more you’ll be pre-approved to borrow.
Stay Within Budget
Buying a home is a major investment. When you get a mortgage pre-approval, you’re able to set your budgetary limits and make sure that any home you’re looking at is a home that you will be able to finance.
Pre-approvals also lends you some flexibility in terms of bargaining and negotiations. If you want some repairs or improvements thrown in or if you want the seller to cover your closing costs, your mortgage pre-approval will help strengthen your position and may make it more likely that you get what you’re asking for.
Securing financing is the first thing that happens when you start to close on a home. With a mortgage pre-approval, financing is already secured and you can jump right to the next steps, such as your appraisal and inspection. This is a particularly beneficial advantage if the seller is also trying to close sooner rather than later.