If you are looking to buy a new home with a mortgage loan, you may want to make getting a mortgage pre-approval a priority. Even if you have purchased a home in the past, tighter approval guidelines have changed lending requirements in recent years. Getting a pre-approval for a mortgage will give you a clear picture of your current borrowing power. Plus, there are defined benefits to approaching the buying process with a mortgage pre-approval letter in hand.
Understanding what a mortgage pre-approval letter is and what it means to you
Your mortgage pre-approval letter is written documentation stating that your lending institution believes you will be approved for a mortgage loan for a certain dollar amount. The pre-approval typically takes into account your current income, work history, credit rating, and debt-to-income ratio. This information is verified by your lender using tax returns, pay stubs and bank account history.
Take advantage of the true benefits of a mortgage pre-approval letter
Your pre-approved status not only lets you know you can most likely get approved for a mortgage loan, it can save you time during both the home search and closing process. Here’s where it can make a difference for you:
- Define your home search: Getting pre-approval for a mortgage can help you and your realtor narrow down the houses you are looking at. If you find out you can get approved for $200,000, but have been spending your time browsing homes that cost upwards of that number, you may need to adjust your expectations. So, the pre-approval will not only save you time, it will also help you avoid getting attached to a home that you cannot get a mortgage loan for.
- Increase your validity as a buyer: Once you find the home of your dreams, the last thing you want is another offer to be accepted over yours, especially if the only reason is the seller’s faith in the borrowing power of the other buyer. Providing the seller with a mortgage pre-approval letter may be what you need to do to assure them that you are the right buyer.
- Increase your negotiating power: The other major benefit to walking into the home negotiation process pre-approved for your mortgage is the impact it has on your ability to negotiate with the seller on price. If the seller is confident you will be able to get approved for a mortgage of a certain amount, they may be willing to take slightly less for the home.
Get pre-approved for a mortgage loan today
If you have just begun your home search, take the time to get pre-approved for a mortgage before you find the home you are ready to bid on. You’ll reap benefits from refining your search criteria to increasing your negotiating power. And, once you find the home you are looking for, all you’ll have to do is call your lender to complete the mortgage application process.
Sponsored content was created and provided by RBS Citizens Financial Group.