In an active real estate market, home buyers are often up against many other buyers, including investors. When this happens, it is usually what is called a seller’s market which puts the seller in the better position. For serious home buyers, having a mortgage pre-approval can close the deal.
A mortgage pre-approval is the process of being approved for the loan. It should be the first step taken in the home buying process as soon as the decision has been made to become a homeowner. Through a pre-approval, the home buyer will learn what they can afford to buy, as well as, the best mortgage for their situation. The pre-approval involves submitting most of the documentation that is necessary for the normal mortgage approval. The lender will examine the home buyer’s income, assets and credit. The loan is processed, any additional information that is needed is requested and then a mortgage pre-approval letter is received by the applicant. Although a pre-approval does not guarantee that the lender will give the home buyer the loan (unless it is accompanied by a Commitment Letter), it is almost a sure thing if the pre-qualification has been done correctly since the only item that should be missing is the real estate sales contract. By going through this process at the beginning, the home buyer will know exactly how much home they can afford to purchase. In addition, it gives the real estate agent a clear idea of the maximum amount of the mortgage that will be offered so that the agent knows what homes to show the home buyer.
When in possession of a mortgage pre-approval, the home buyer is also showing the home seller that they are already approved for a mortgage up to a certain amount of money. The gives the home seller the confidence to know that if a contract is signed, the transaction will move ahead smoothly and the sale will be completed. This simple procedure of obtaining a pre-approval can close the deal.
Author Bio: Rosemary has been writing since 2010 for FreeRateUpdate.com, a company that matches consumers with banks and lenders offering low mortgage rates. Previous to her writing career, Rosemary spent 13 years working hands-on in the mortgage industry as a mortgage loan analyst, mortgage processor, property manager, and a mortgage underwriter.