Rent-to-own, or lease purchase, is a home-buying option that doesn't get a lot of attention,…
Buying a home is scary but it’s even scarier if you don’t begin your home search by asking your lender to pre-approve your mortgage. Imagine walking into the grocery store without your wallet. That’s essentially what you’re doing without pre-approved financing for a home.
Your bank pre-approves you after they verify your financial information and ensure your documentation to determine how much mortgage you can afford. This is different than pre-qualification which is an estimate of what a borrower might qualify for based only on brief financial information given verbally by the borrower.
To pre-approve your mortgage, your banker will request the same information from you that they would require for the actual mortgage. They run a credit check and history and confirm your employment and other financial information before offering a pre-approved home loan to you. When you’re pre-approved, your bank will give you a letter stating such.
Why You Should Ask Your Bank To Pre-Approve Your Mortgage
- Clear Up Credit Issues
Many buyers are unaware of credit problems before they apply for a loan. With a mortgage likely being the biggest loan you’ll apply for it becomes important to tackle any credit blips before you apply for a mortgage. Your bank will run credit checks for your history and score, giving you a chance to answer damaging information in your report before you begin your home search.
- Understand All The Costs
There are many costs involved when buying a home. It’s not just a down payment and a mortgage. The truth is there are many other costs involved. In order for the bank to pre-approve your mortgage, they must review all the costs for which you will be responsible. This gives you a great understanding of how much your mortgage will really cost you.
- Explain Your Income
There’s a big difference between an employee and a self-employed borrower. There are also differences in contracted employees and commission-based employees. Seeking pre-approval gives the bank time to review all your income sources and verify them as well. You might have to provide additional paperwork to confirm your income, but once it’s done, there’s no delay on putting in an offer on a great home because the bank can’t confirm your income.
- Face Multiple Offers
Tight markets can make for stressful bids. Homes often sell so fast there’s no time to even know why your offer didn’t make the cut. Once you’re pre-approved, your offer is almost as good as cash. This can often make the difference between winning the home or losing the offer.
Enjoy Your Home Search!
All the work is done once you’re pre-approved! If an owner accepts your offer, it’s only a matter of days to get to the closing table. This is a big perk of being pre-approved and it could make a big difference to the right homeowner.
Once you are pre-approved, the market is yours! Take your time and enjoy your home search! The confidence you gain and the stress you save yourself is worth the time spent with your bank for pre-approval.