The first and probably the most important step in the home buying process is obtaining a letter of pre-approval from your lender. A mortgage pre-approval means securing a commitment with your lender. It means that your loan application has been pre-qualified and they will provide you with the financing of the property. Even if you ask your buyer’s agent, they will probably recommend you to get pre-approved early. Having a pre-approved loan has a lot of benefits that can make your home buying journey easier.
Here are five benefits of having a pre-approved loan:
1. It will help you plan your finances ahead.
By having a pre-approved mortgage, you’ll be able to know how much money you can borrow. Buyers should understand that lenders do not have unlimited funds that they can provide to anyone who applies. The amount of money that borrowers can borrow would depend on their income, credit score, debt-to-income ratio, and more.
Once you’ve determined how much money you can borrow, you’ll be able to plan your finances ahead. This is important as this will let you know the price range of the property that you can afford. When it comes to home buying, financial planning is a critical step. It will determine the type of property and the payment terms that are right for your budget.
2. You’ll have more time to look at the right homes.
Since you have set your budget based on your pre-approved mortgage, you’ll be able to determine the price range of the properties that you should look for. Inform your buyer’s agent about this so they can provide you with the best option and recommendations. By knowing what you should look for and with the help of your buyer’s agent, you can avoid looking at properties that are beyond your budget. This will save you from all the hassle. It will give you more time to assess and evaluate the properties that you can actually afford and easily narrow down your options.
3. Sellers will look at you as a serious buyer.
If you have a pre-approved loan when looking for a house and when making an offer to a seller, they will consider you as a serious buyer. This is because buyers need to go through a certain process for them to obtain a loan pre-approval. Hence, taking this extra effort would give sellers the impression that you are serious about the purchase. Having pre-approval gives sellers the confidence that you are backed by a mortgage company. They are assured knowing that you are capable of financing the property.
4. You’ll be able to give a strong offer and have negotiating power.
In most cases, having a letter of pre-approval provides the buyer an advantage when making an offer. Aside from being able to give a strong offer, you’ll be more confident to negotiate with the seller. Your letter of pre-approval is proof that you are a serious buyer. Even if you present an offer that is lower than the listing price, sellers will more likely accept your offer than a buyer with a higher offer price but without a letter of pre-approval. Since you have been pre-approved by a lending company, they know that you are more likely to push through with the final settlement.
5. It will let you have a faster closing period.
Since you have already accomplished various requirements during the pre-approval process, your lender should already have the information they need to finalise your loan. Should they need more information, it won’t take too much time to accomplish them. Having pre-approval will help speed the entire lending process. With this, you’ll be able to close the deal on time and enjoy your new home sooner. This would be convenient for buyers who need to move in immediately.
A letter of pre-approval isn’t just a simple piece of paper. It is proof of your mortgage company’s commitment to help you with the financing that you need to purchase a home. This piece of paper will give you a buyer’s advantage and make your buying journey easier.
There are more benefits of having a pre-approved loan. If you need help with buying a home or if you have questions about your mortgage loan application, ask the experts from Buying Perth Real Estate. They are experienced buyer’s agents with vast experience in real estate. Their knowledge and skills will make your home buying experience a breeze.
For a free consultation, email us at firstname.lastname@example.org or give us a call at (08) 6215 0200 or 0412 926 190.