Warmer weather and longer days means there are more opportunities to view property than during the cold, dark season of winter. As such, the arrival of spring is often marked by an uptick in real estate sales. Perhaps you are one of those who are eagerly awaiting spring before becoming a homeowner. If so, you will want to obtain mortgage preapproval now-here’s why.
Reasons for Preapproval
Becoming preapproved for a mortgage may seem like an additional step, but it is actually the starting point for many real estate transactions. Mortgage preapproval has numerous advantages, including:
- Helping you determine what your home-buying limits are. After all, the last thing you want to do is make an offer on your dream house, only to be turned down because you cannot quite afford it.
- Providing you a leg up during negotiations. Sellers who receive several offers often go with those from pre-approved borrowers first, since they are less likely to be turned down for a loan than others are.
- Preparing you for a closing. Many times, buyers become aware of any hidden costs only after talking with a lender during the preapproval process.
- Allowing you more time to gather documents or correct errors with your credit report.
The Preapproval Process Takes Time
During the preapproval process, you are not actually applying for a loan. That doesn’t mean you will receive an answer overnight. You will still need to submit documents (lots of them), and have them scrutinized by a lender. This can take anywhere from three to ten days in most instances. Wait until spring when more people are seeking preapproval, and your wait time could be even longer.
Once your loan officer is satisfied, he or she will provide you with a preapproval letter. This letter may spell out the anticipated terms of your loan as well as your spending limit. It is typically good for up to 90 days, after which time you must re-apply. Most people have already found a home by then, but the good news is that if you do have to re-apply, doing so will be much easier the second time around.
Prequalification vs Preapproval
The terms “prequalification” and “preapproval” are often used interchangeably, yet they are not quite the same thing. During prequalification, a mortgage company does not pull your credit report, and may even forego certain financial documents. Instead, the lender relies on information you provide concerning income and assets.
Naturally, this means that prequalification occurs much faster, but is also less accurate. Since there is a greater degree of risk involved, many sellers also look for buyers who are preapproved rather than prequalified. Many people use prequalification to give themselves an idea what price range to look in, then become preapproved to obtain an edge over other buyers.
Spring isn’t really that far off, so it is time to stop procrastinating and get preapproved for a mortgage. Act now, and you will be ready to make that offer once you finally find your dream home.