What is Mortgage Pre-Approval?
Just because it's one of the most important first steps in the home buying process doesn't mean mortgage pre-approval gets the attention it deserves. Think about it: what do you think the first step in finding a house is? Driving around the neighborhoods you want to live and looking for the "For Sale" signs? Asking your friends and family who their favorite Realtor is? Looking up homes online? No, no and no. Although these are often what we all do, the first step really needs to be mortgage pre-approval.
What is Mortgage Pre-Approval?
Simply put, it's finding out how much house you can afford on a monthly basis. A lender will look at your income, your debt and your credit score then help determine how big of a monthly house payment you can realistically afford. When you know that, you will know how much house you can afford overall. Of course, some of that depends on the property taxes and insurance costs you'll end up paying. But you'll have a good idea on what price range you should be considering.
Mortgage pre-approval also lets a real estate agent know that you're a serious buyer with potential. Too often a buyer will be all gung-ho on a house they think they can afford, or a neighborhood they love, and will end up learning it's out of their price range for the time being. This can result in a lot of time wasted looking at the wrong houses. Instead, mortgage pre-approval puts you and your agent on the right track for the right homes.
Mortgage pre-approval is not rocket science. In fact, you can actually take 3 easy steps to get pre-approved. It also doesn't mean that you have to stay with the lender that's pre-approved you. It's not a binding contract. Keep in mind though, pulling your credit history at a ton of places could affect your score. Shopping around for rates and service is okay, just be cautious.
You can talk to a mortgage consultant about mortgage pre-approval anytime. Click the button below to find out how much house you can afford so you're not shopping in the wrong neighborhoods!
(approved photo: Flickr user striatic)