Buying a home involves many steps. Among these are mortgage pre-approval, which is a step that is sometimes overlooked, but very important in any property acquisition process. Indeed, although it is not mandatory, mortgage pre-approval remains a highly recommended asset, whether you are a first-time buyer or an already experienced owner. This preliminary approach offers many advantages that should not be overlooked!
Why get a mortgage pre-approval?
For any real estate purchase, certain conditions and preparation contribute to the key to success, if you were to ask any Denver mortgage broker. A well-planned project saves you both time and money. In addition, what better way to prepare than to get a mortgage pre-approval. This is usually done before you start looking for your new property. Its purpose is to prepare your loan application and help you direct your research.
Moreover, many real estate brokers require that you have completed this preliminary step before showing you homes that might interest you. They are thus assured that you have the capacity to complete your purchase project.
Mortgage pre-authorization essentially consists of defining which banks are committed to supporting you in your intention to purchase, as well as the amount of mortgage that could be granted to you for the realization of your project. Be careful, however, not to mix up mortgage pre-authorization (or pre-approval) and mortgage pre-qualification (or pre-qualification)! Although they are two similar concepts, they have different purposes.
During the mortgage pre-approval, the lender certifies the maximum amount he would be willing to provide you for the purchase of your property and on what conditions he would be willing to do so. This allows you, even before starting your research, to know the limit of your borrowing capacity, depending on your current financial situation.
Keep in mind, however, that you don’t have to borrow the maximum amount allowed. On the contrary, it could be more advantageous to ask for a less imposing loan. In any case, be sure to respect your budget and your ability to repay so that your purchase project takes place in the best conditions. Your borrowing capacity could change. You should know that the maximum amount specified in the mortgage pre-approval may be subject to change if your financial situation changes between the time of your application and that of your loan. This is not a final sum.
By knowing in advance your maximum borrowing capacity, you can more easily direct your search to affordable properties for your budget. This way you will avoid wasting time visiting houses that are too expensive for your means and will be able to concentrate your efforts in the right places. Once you have found the home of your dreams, you will also be certain that you have the financial means to buy it as long your budgetary situation has not changed.
Getting the Best Interest Rate
The mortgage rate can have a huge impact on the interest you’ll pay on your long-term loan. That’s why buyers always try to get the best rate possible. Having a mortgage pre-approval can help with this since most lenders “lock in” the going rate for a certain period of time (usually 30-120 days). Thus, if at the time of buying your house the mortgage rates have increased, you will be able to benefit from that guaranteed by your pre-authorization. This is a considerable advantage as would be agreed on by any Denver mortgage broker!