What’s the Primary Benefit of Being Prequalified for a Mortgage
The primary benefit of being prequalified for a mortgage is to understand your buying power and to show realtors and home sellers that you are a viable and serious buyer.
3 Primary Benefits of Being Prequalified for a Mortgage
There are three primary benefits of being pre-qualified for a mortgage before beginning your home search.
1.Helps you to understand your true buying power – Knowing your buying power and how much you can afford is critical before shopping for a home. Doing so will help you to focus on searching for homes in areas and price ranges that you can afford.
2.Real estate agents prefer to work with prequalified buyers – A real estate agent’s time is extremely valuable especially when they are balancing many clients and their personal time. Agents will not spend time touring homes with buyers unless they know the buyers can afford to purchase a home.
3. It shows sellers that you are a serious and qualified buyer – Home buyers have a better chance of having their offer accepted if they are already pre-qualified for the mortgage amount needed to purchase the home. This is especially important when other buyers are making offers on the same house.
If you are thinking about buying a home, remember these three benefits and speak with a lender prior to contacting a real estate agent to tour homes.
Realtors Discuss the Primary Benefit of being Prequalified for a Mortgage
Real estate agent Kevin Vitale of EXIT Beatrice Associates says, “Looking for homes without a pre-approval and creating a budget that works for you is a recipe for disaster. Having a pre-approval letter and understanding how a mortgage impacts your monthly finances is the first step to take… before ever looking at homes. The pre-approval allows you to know exactly what each house will cost you and prevent unnecessary surprises just before closing on a new home.
According to Bill Gassett, owner of Maximum Real Estate Exposure, “there are two primary benefits of being preapproved for a mortgage. First, it allows potential home buyers to know exactly what they can afford for a home. They will be able to stay within budget when looking for properties.”
Bill also says, “it gives a home seller confidence that a buyer will not be turned down for a loan. Sellers do not want to take their homes off the market only to find out months later a buyer does not qualify to purchase.”
How Soon Before Shopping for a Home Should You Get Pre-Qualified?
We recommend speaking with a lender at least three months before beginning your home search. A good loan officer can help determine if you need to deal with any credit, income or job related issues.
Sometimes dealing with or correcting these things take a little time which is why it is important to identify the issues well in advance. Saving for a down payment and improving credit scores may be something that you work on for a few months.
Pre-Qualified vs Pre-Approved for a Mortgage
There are two very distinct differences between being pre-qualified and pre-approved for a mortgage.
When you are pre-qualified, the loan officer will gather your income and asset information, pull your credit, and then submit your scenario into the desktop underwriting system for a system approval. Then, the loan officer will issue the pre-qualification letter for you to submit to your real estate agent.
When you are pre-approved, it means your file was actually submitted to underwriting which is a more reliable approval in the event the loan officer misinterpreted the guidelines.
Should I Get Pre-Approved by the Realtor’s Lender?
Depending upon your credit and income situation, the realtor’s lender may be able to help you. However, many lenders do not have the ability to qualify you for as much as you need, or even at all. The key to maximizing your pre-qualification amount is to work with a lender who has fewer restrictions or mortgage overlays.
It is for this reason that we recommend you also speak with another lender to make sure you are getting a second opinion and an alternative quote. Read [Should I use My Realtor’s Preferred Lender]
Bottom Line
Getting preapproved for a mortgage before beginning your home search is one of the best home buying tips that anyone can offer.
Related Articles
Home Affordability Calculator – This home affordability calculator will give you an idea of how much you can afford. This is just a basic idea and you should still speak with a loan officer before looking for a home.
Mortgage Broker vs Small Lender vs Large Bank – In this article, we outline the benefits of each type of lender.