All About Mortgages: Why is it Important to Get Pre-Approved for a Mortgage?

In this article, you will learn why is it important to get pre-approved for a mortgage and dive deeper into the pre-approval process. This article is part of a series ‘All About Mortgages’ that answers questions for those who seek out general knowledge on the subject matter.

If you are interested in buying a new home. It is important to get pre-approved for a mortgage. Why is it important to get pre-approved for a mortgage? In short, obtaining the pre-approval letter saves time, avoids disappointment, improves negotiation power, saves money, attains quicker possession dates, and real estate agents are going to want a pre-approval letter to justify their time in showing the buyer homes. Also, it gives the potential borrower an idea of how much they are pre-qualified to determine what market they belong in.

Why is it Important to get Pre-Approved for a Mortgage?

Real Estate Agents Are There for You

If you are in the market to purchase a home. You can always ask for help from a real estate agent. Real estate agents are there to help their clients to get started with the mortgage application, many times they already have referrals in place to minimize the headache in the home buying process. Real estate brokers devote a lot of time showing their clients’ homes; therefore, they will guide you with the help of the mortgage lender to get you pre-qualified so you can buy a home as painlessly and satisfactory as possible.

Moreover, real estate agents may even deny service until you are pre-approved for a mortgage and the value of what you are prequalified for. Real estate agents typically are paid by commission and they can lose a lot of money and time if a home is not bought or sold. This is why real estate agents may require a pre-approval letter before even getting started. In other words, when the mortgage applicant is pre-approved this shows the seriousness of the new home buyer.

ResourceMortgages 101

The Pre-approval Process

The pre-approval process in the past, use to be on a verify first, approve the last system. In today’s market, your mortgage application is either approved or denied and verified last. Not long ago, mortgage applications would be sent out to a loan committee where once a week or so, these mortgage bankers would discuss the negative and positive on each mortgage applicant.

First, in the past, before the technology shift, you would gather all necessary documents, tax returns, bank statements, and paystubs. Then you would go meet with your local mortgage loan officer at a local bank. That’s where you would fill out your mortgage application, and the loan officer would go over the documents.

In addition, your credit report would be pulled where it would show your credit score. And based on your debt-to-income ratios, all this would determine further approval or the value of what you would be prequalified for. If there were any discrepancies, for instance, a late payment. The mortgage loan officer may request an “explanation letter.” In many situations, simply stating that “I forgot” would be okay.

However, the mortgage loan officer was looking for patterns in the history of your credit report. The mortgage loan officer would ask for employment history, current job, or any gap in employment. And if there were any, an explanation letter would be requested.

Once all that information is obtained, analyzed, and dealt with. It would finally go to an underwriter for final approval. This pre-approval process simply meant that you were verified first and approved last.

Today, the pre-approval process is now approved first and verify last. Pre-approval simply means that you have a willingness and ability. Willingness and ability are two sides of the same coin. Both are necessary for a pre-approval process. Yes, bank account statements, tax returns, paystubs are all eventually required. But today’s process is more painless. It allows the home buying process to be more efficient. It basically states, ‘we are going to approve you for this amount so you can go out shopping for a home, meanwhile, we will start verifying.’

Many people may have willingness but no ability or only the ability but no willingness. In other words, while many people may have enough funds to afford to make the monthly payments on a mortgage and eventually pay off the loan, they may not have the willingness. And, obviously, many people may have the willingness to make the monthly payments, but they just don’t have the funds.[i]

Why is it Important to Get Pre-Approved for a Mortgage? 

As mentioned above, pre-approved mortgages are offered by many financial lenders. If you are interested in getting a pre-approved mortgage, we encourage you to start immediately. As with all other loans, it will turn out that it may take some time before you are approved for a mortgage, even for a pre-approval. You will need to carefully check your credit history and current financial situation.

Looking for a home? Here are some important reasons; why is it important to get pre-approved for a mortgage, first?

A Mortgage Pre-Approval Will Save You Time! 

By getting pre-approved for a mortgage, you will know exactly how much credit you will be able to borrow. After obtaining this information, you must provide it to the real estate agent. Your real estate broker will only let you examine the houses that you can realistically afford! This may seem obvious, but it does not make sense to spend your precious time viewing homes that do not fit in your price range. By getting pre-approved, you will not waste time!

 Avoid Disappointment – Get a Mortgage Pre-Approval!  

Getting a pre-approved mortgage will help you avoid disappointments. Not only will you not waste your time viewing homes you cannot afford, but you could end up loving one of them. Can you imagine the frustration that may happen if you discover that your dream home that you had just viewed is not within your financial affordability? That’s why you need to get a pre-approval, so you have 100% confidence in what you can afford, before even viewing a home!  It is really painful to know that the only thing that comes between you and the home of your dreams is the lender, which dictates how much credit they are willing to give based on your qualification. To avoid this unnecessary pain, first, obtain the first consent. That way you will not see a home that you do not qualify for. In this way, you view only homes that you have the potential of owning. By this, you are on the road to reality. It gives you peace of mind that you qualify for this amount.  It also prepares you for your future financial obligations, by this, you can start to calculate how much your monthly payment can be.

 A Mortgage Pre-Approval Increases Your Negotiating Power!

Another benefit of mortgage pre-approval is the negotiation position that you obtain, which may result in potential money savings. In the real estate market, many of the best properties often attract many offers. Many sellers are starting to not even consider a buyer without a pre-approval letter. This is where you gain a slight competitive advantage. If you approach the seller with a declaration of the pre-approval letter, this is saying, “I’m a serious buyer.” The seller will be more willing to accept your offer, even if the offer is slightly lower than the others. Because your offer will not be dependent on future financing (you are pre-approved). Unless competitive offers are supported by previous approvals, you will be in a better position to negotiate on a better buying price and you can save money! With confidence in this financial security, you can also ensure the comfort and confidence of the seller. Sellers are more likely to accept the offer immediately from a pre-approved buyer, even if the offer is lower than the asking price.

A Mortgage Pre-Approval Could Save You Money! 

In addition to saving money when buying a home, getting a preliminary agreement on a mortgage can also save money on a future loan. The advance consent closes the interest rate for a certain period (often around 6 months), which can save huge amounts of money. For example, if you bought a home three months after receiving prior approval, then your mortgage interest rate has increased, you will get a loan at a lower price. Earlier consent ensures that the original interest rate is lower, and if the interest rate falls during this time, you will simply get the best interest rate on the loan.

Your Realtor Prefers You get a Mortgage Pre-Approval 

As previously mentioned earlier in this article. Another reason why you should get a pre-approved mortgage loan is the difficulty in finding a mediator working with you. If you do not have a pre-approved mortgage, you and the real estate agent can waste time on viewing or offering offers on homes that you cannot even afford.

ResourceMortgages For Dummies

 A Mortgage Pre-approval Allows for Quicker Possession Dates    

Because you do not need additional time to organize the application process, the lender can speed up the process. Remember that prior consent means that you are personally entitled to the loan amount, but your funding is not complete. In the last step, the lender must show that the chosen home is equal to the amount of money you will receive. An assessment will probably be needed. When a lender agrees to a loan in advance, the closing period can be halved. Sellers gladly accept offers that seem short to clear the situation. Since the period of applying for a mortgage is periodic, obtaining the initial acceptance of a mortgage, the lender can speed up the entire procedure. Evaluation can be made immediately. It is even possible to shorten the period of 30 days to two or three weeks, especially in cases where the seller wants to liquidate his assets immediately, but cannot specify the offer he accepts. If you have already received a housing loan approval, you have a better chance of closing the transaction if you can fill out the seller’s request for quick closure.

Final Thoughts on Why is it Important to Get Pre-Approved for a Mortgage?

Again, why is it important to get pre-approved for a mortgage? Because it greatly benefits you by avoiding future disappointments, it may save you money, you can possess the property quicker, you have obtained negotiation power, you will know how much you can pay for a home, and many real estate agents won’t even start working with you until you have your pre-approval letter.

Bibliography

[i] Reed, D. (2008). Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan. New York, NY: Amacom.

This page may contain affiliate links. This website may contain content that comes from Amazon. This website and its pages are not intended to constitute legal, financial, or tax advice. The information on this website and its pages are not intended to constitute investment advice and all content are the views and opinions of the author(s), contributors, or administrators. Please read our disclaimer for more info.

Hi. My Name is

James Gheen

Welcome to the Bigger Investing website. I’m here to help you find the resources, motivation, and guidance for all entrepreneurial, investing, business, career endeavors, and more, so that you can invest in what’s most important. Your mind!

My focus is to equip you with expert sources, books, guides, articles, and more to help you achieve your personal goals.

Want to learn more? Take a look.

getabstract ad


Read in Graphics

Rich Dad Summit Ad

What Does a Career Portfolio Consist Of?

What Does a Career Portfolio Consist Of?

career portfolio is a collection of work samples and documents that demonstrate your skills, qualifications, experience, and potential to new employers. Many different aspects of a career portfolio can vary depending on the individual's needs....

How Can I Improve My Job Hunting Skills?

How Can I Improve My Job Hunting Skills?

ob hunting is hard. There are so many things to think about and do, that it can be overwhelming. But there are also some simple job hunting tips you can follow to improve your job search experience. In this blog post, we focus on the most...

What are Career Planning Tools?

What are Career Planning Tools?

areer planning tools are designed to help people better plan out their careers, which is important for several reasons. Knowing what skills you have and where your interests lie will help you find the best jobs that match those desires. Career...

What is Strategic Planning Experience?

What is Strategic Planning Experience?

trategic planning is an important part of any career. It's more than just a job title; strategic planners help guide the company towards its goals. This person will be responsible for developing strategies to solve problems, set priorities, and...

What are Career Planning Skills?

What are Career Planning Skills?

hat are career planning skills? Are they the same as career development skills? This blog post will answer this question and more. What does it mean to have a successful job search, or how can you tell if your resume is good enough for an...

What is Strategic Career Planning?

What is Strategic Career Planning?

hat is strategic career planning? Strategic career planning is a process of evaluating your skills, interests, and values to determine the best course for you. Career development consultants are experts in this field and can help you with...

How Do You Write a Career Strategy Plan?

How Do You Write a Career Strategy Plan?

hat does a career strategy plan entail? A career strategy plan is a document that outlines the goals and objectives of your business, as well as how they can be achieved. If you are looking to improve your business's competitiveness in terms of...

What are the Elements of a Business Strategy?

What are the Elements of a Business Strategy?

any elements go into business strategy. This blog post will explore what these elements are, and how they work together to help your business succeed. These include everything from the industry you're into the way you market your product or...

What is Single Branding?

What is Single Branding?

ingle branding refers to a business strategy that is focused on one brand instead of multiple brands. The single branding strategy is often used by companies such as Coca-Cola, Nike, Adidas, and Apple. Single branding can be beneficial for...

What is Umbrella Branding Strategy?

What is Umbrella Branding Strategy?

hat is umbrella branding? It's a business strategy that can help you grow your brand and make more money. The goal of this marketing tactic is to create a recognizable name or logo for your company, which increases customer loyalty and makes it...

What is Multi-Branding?

What is Multi-Branding?

hen you think about your business, you likely have a general idea of what branding means. Branding is the process of creating and maintaining an identity for a company in the minds of its customers or potential customers. This includes all aspects...

What is Family Branding Strategy?

What is Family Branding Strategy?

family branding strategy is a business marketing strategy that uses the family name or image as the brand. This type of branding technique can be very effective for companies with a strong and well-known family, such as The Walt Disney Company....

What is a Private Branding Strategy?

What is a Private Branding Strategy?

rivate branding is a strategy that can be used by entrepreneurs and companies to differentiate their business from competitors. Private brands are those products or services which have been created, manufactured, or marketed under one company's...

What is Range Branding Strategy?

What is Range Branding Strategy?

any business owners are tired of the same old branding strategies that have been used for years. They might not know it, but there's a range of branding strategies out there and it can help them break from the norm! In this blog post, we will...

Which REITs Pay the Highest Dividend?

Which REITs Pay the Highest Dividend?

hat are the best-paying REITs? Which commercial real estate companies pay the highest dividend per share? The answer to this question is not as easy as you might think. There are many factors that go into determining which REIT pays the highest...

How Can I Make My Brand Powerful?

How Can I Make My Brand Powerful?

he most important thing is to know your brand. If you don't, then it will be impossible for you to find a way to make it powerful. You want your brand to represent what your business stands for, and if that's not the case with how you're currently...

What Are the Five Main Areas of Branding Strategy?

What Are the Five Main Areas of Branding Strategy?

ne of the most important aspects of running a business is branding. What does your business say about you? Do you want to be seen as trustworthy, or professional? Your logo and slogan are part of this process, but there are other elements too -...

What is the Best Branding Strategy?

What is the Best Branding Strategy?

he best branding strategy is the one that works for your company. In this blog post, we will discuss what some of those strategies are and how they can be applied to your business. We will also provide you with a few examples so that you can...

What is a Maverick leader?

What is a Maverick leader?

maverick is a rebel. They are different from their peers in that they buck the trends, and think for themselves. A maverick leader is someone who does not follow the pack but leads it instead. This type of leadership has been around since ancient...

What are the Characteristics of an Assertive Person?

What are the Characteristics of an Assertive Person?

ssertive people are confident in themselves and their abilities, and they don't back down when it comes to defending what they believe. They know who they are, where they want to go with their life, and how to get there. Assertive people are...

Where is AI Used in Business?

Where is AI Used in Business?

rtificial intelligence is rapidly changing the landscape of business and industry. AI has been used in a wide variety of industries to make processes more efficient, improve efficiency, and reduce costs. In this blog post, we will explore where AI...

What is the Role of Artificial Intelligence in the Business?

What is the Role of Artificial Intelligence in the Business?

rtificial intelligence is one of the most important innovations in business. It has been an integral part of the development and success of many businesses, including Amazon, Apple, Google, Microsoft, and IBM. As more and more industries become...

Should a Leader be Assertive?

Should a Leader be Assertive?

ne of the most important traits that a leader should have is assertiveness. Leaders are often required to make decisions and take charge to be successful. But how does assertiveness play into this? In this blog post, we will explore what assertive...

What is Assertiveness in the Workplace?

What is Assertiveness in the Workplace?

ssertiveness is the ability to express one's opinions and feelings directly and straightforwardly. It can be difficult when people are unsure of how to balance their need for self-expression with their responsibility to show consideration for...

Why is Assertiveness Important in Business?

Why is Assertiveness Important in Business?

here are two main reasons why assertiveness is so important in business. First, it helps you to stand out from your competition. When people come across your website or company profile online, they can't help but notice how confident and...

What is the Most advanced AI in the World?

What is the Most advanced AI in the World?

t's a question that has been debated for years: what is the most advanced AI in the world? Artificial intelligence, or AI, has advanced to new levels of complexity and human-likeness. This article will explore some of the most advanced artificial...

What are the Four types of Artificial Intelligence?

What are the Four types of Artificial Intelligence?

rtificial intelligence is a hot topic these days. With the advancement of AI, many people are wondering what it means for humans and how we should prepare ourselves for the future. And with all this talk about artificial intelligence, you might be...

FinanceMortgagesAll About Mortgages: Why is it Important to Get Pre-Approved for a Mortgage?