Pre-Approval Can Help You Get the House You Want
By B. Conrad
Photo: © Karla - Dreamstime
 Before you even go looking at houses, find a good lender and apply for a loan pre-approval. The lender will go through all the paperwork, look up your credit record, verify your income and so on. Of course, they can't actually approve a loan for a specific house, but going through the pre-approval process has a number of benefits for you.
1. It will tell you your price range.
The lender will determine the total mortgage amount they can approve for you. Then, using current interest rates and local property taxes and insurance rates, plus the amount of money you have saved up for a down payment, they will figure out how much house you can afford.
This eliminates the guesswork. If you just guesstimate how much you think you can afford, you may be overly optimistic and waste time looking at houses too expensive for your budget. |
Or you may be pleasantly surprised—with today's low interest rates and your good credit, perhaps you can afford a higher priced home than you thought. So don't waste time looking at houses that aren't good enough for you and your family. You don't want to settle for less than you can pay for.
2. It will give you an advantage if
you're competing to buy.
Say four people put in a contract for a house. Which one will the seller accept? If three people make their offers "subject to loan approval" and your contract says the loan is pre-approved and it's subject only to an appraisal (universal), you'll get the contract. They'll get their money fast, and with certainty. Sellers like that!
3. If you need to clean up your credit, it's best that you find out immediately.
No one wants to hear bad news—but if your FICO credit score is low, it's better to learn that before you get your heart set on a house you can't afford. Perhaps the best strategy for you to buy a new house in the future is to reduce your spending, take a second job, and set up a system where you make sure you pay your bills on time (put a check in the mail at least one week before the due date or pay online).
Getting a mortgage loan pre-approved before you even start looking at houses can help you save time and money. And you'll only look at houses in the price range you want and can afford. |
