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Financing a Home – The Benefits of Pre-Approval

by beconrad

For most people, shopping for a home means shopping for a mortgage – a process that can be intimidating even for the financially savvy. When you shop for a home, you can choose to find the property first and then nail down the financing, but there is another, and potentially better, way to approach the financing puzzle.

Pre-approval allows you to qualify for a mortgage and determine exactly how much home you can afford to buy. Getting pre-approved for a mortgage has a number of important advantages, some of which are outlined below.

It Gives You Additional Negotiating Power

Shopping with a pre-approval letter in your hand gives you additional negotiating power, especially with a motivated seller or an owner who has been burned before. Nothing is more frustrating to a seller than accepting an offer only to find the buyer cannot obtain the proper financing. By getting pre-approved, you reassure the seller that you have the financing needed to back up your offer.

It Helps You Set a Realistic Budget

Setting a realistic housing budget is important when buying a home. Buying more home than you can afford is a recipe for disaster, but it can be hard to know what that limit really is.

When you go through the pre-approval process, the bank or mortgage broker will carefully examine all aspects of your finances, from reviewing your past tax returns to verifying your current income. They will then use that information to determine how much you qualify for, and give you a pre-approval letter to help you get started.

It Simplifies the Buying Process

Few things about buying a home are simple, but pre-approval gives you one less thing to worry about. Instead of fretting over the mortgage application process and worrying about whether or not you will qualify, you can focus on choosing the right home.

Getting pre-approved will also make working with the real estate agent a lot easier. If you are pre-approved for a $150,000 mortgage, the real estate agent will not waste his or her time (or yours) showing you a $300,000 home. Focusing on houses in your price range will make shopping easier – and faster.

The process of qualifying for a mortgage can be a difficult and intimidating one, but it doesn’t have to be. Getting pre-approved for a mortgage will make every aspect of the home buying process, from negotiating with the seller to establishing a realistic housing budget, a lot easier.

Shopping for a Home Loan – What Every Buyer Needs to Know

Buying a home is a difficult and sometimes intimidating process, and finding the right loan can be one of the hardest aspects. Shopping for a home loan is quite different from financing a car or other short-term purchase. After all, you will be living with the consequences of the decision you make today for the next 15 to 30 years.

Whether you are in the market for your first home or looking for a larger property for your growing family, there are some things you need to know when shopping for a loan. Here are some practical tips you can use to get the best financing for your new home.

Know Where You Stand

If you do not yet know your credit score, getting it should be your first step. Until you know your credit score, you have no way of knowing where you stand or what kind of rate you may qualify for.

Getting access to your credit report and credit score is easier than ever before. Many credit card issuers now print the score right on their statements, so the information may be closer than you think. If your credit card company does not provide that information, you can get it easily, and inexpensively, by contacting the three major credit reporting bureaus – Equifax, Experian and TransUnion.

Check the Financial Press

Even if you are not a regular reader of the Wall Street Journal or Barron’s, it is a good idea to check a recent issue. The financial press can provide a host of useful information, from the current level of interest rates to future trends.

Knowing the current state of the economy and interest rates can help you find the right financing for your new home. If interest rates are expected to rise shortly, locking in a low rate today could save you a lot of money. If rates are expected to fall or stay the same, you can afford to wait as you ferret out the best deal.

Shop Around

As with any type of financial decision, shopping around is likely to yield the best results when it comes to getting a mortgage. Expanding your search to a wide variety of financial institutions, from independent mortgage brokers and large money-center banks to local credit unions, is essential if you want to get the lowest interest rate and best terms possible.

Shopping around is important, but you can still start with your own bank. If you have a long history with the institution, you may be able to get a great rate based on your past history of financial responsibility. You can then use that mortgage rate as a benchmark, comparing it to other competing offers as you shop around.

Financing a home is not an easy process, but doing your homework and knowing how to prepare can make it simpler. The tips above can help you get the best mortgage for your money and the best deal on the home of your dreams.