There are advantages to getting pre-approved for a loan before you begin your search for a new house.
Pre-approval removes some unwanted pressure.
Once you find a home that you want to purchase, and your offer is accepted and the forms have been signed, the clock is ticking for you to get a mortgage. If you are pre-approved, getting a mortgage should run rather smoothly and quick.
However, if you are not pre-approved then you might run into some problems. You will feel rushed and stressed to get the mortgage before the close. Also, if your lender has a stack of loans to process you could seriously be "cutting it close".
Pre-approval makes you look like a serious buyer.
Suppose there are two buyers who make an offer on a house. The first buyer is not pre-approved. The second buyer is pre-approved and has a letter from their lender stating that they can afford the home. The seller is probably going to pick the pre-approved buyer. They look more motivated and creditable. The pre-approved buyer is more likely in a better position to negotiate the price of the house also.
Pre-approval is a simple process:
- Fill out an application and give it to your lender
- The lender will obtain your credit report and qualify you based on income, debts, and credit score.
- The lender will give you a letter stating how much you can afford to pay for a house.
It's fast, easy, and concrete evidence that you're motivated in the eyes of a seller!