Why should you get a home loan pre-approval?

If you are interested in buying a new home, it's usually a good idea to get your home loan pre-approved first.

If you are interested in buying a new home, it's usually a good idea to get your home loan pre-approved first.

The process of getting approved basically amounts to filling out some paperwork and providing proof of your income and assets. The lender will look at your credit report and make sure that you have the credit profile that they are looking for.

It means that when the time comes for you to make a bid on a house, you are able to move forward quickly without hesitation.

Here is why should you get a home loan pre-approval.

Home Loan Pre Approval Process

There are many different loans for a home that you could explore and it's better to get that out of the way first. By getting pre-approved, you can figure out exactly how much money you can qualify for, and the interest rate you can expect to pay.

Most lenders put a loan to valuation ratio on a loan and home. For home loans that means that you might have to come up with anything from 3 per cent of the total value of the home as a deposit, or as much as 20 per cent.

It may take time for you to have that sort of mortgage deposit available, particularly if you have it tied up in a term deposit or in shares, so it is good to know what to expect.

You might also find that some lenders are prepared to loan you more money than others, depending on your good credit history, or bad credit history.

Other lenders would not lend him money because a credit problem went against their lending guidelines, however his lender agreed to refinance the loan because he had been a loyal customer who had not missed any payments.

Remember that lenders will do their own property valuation, and if they do not agree with the asking price of a property after comparing it to the valuation they may reject the loan home.

It pays to know what you can afford. If you qualify for a maximum of a $150,000 mortgage, you don't need to be looking at houses that are $300,000 in value. You're only going to waste your time and the time of the real estate agent that's working with you.

Once you know exactly how much you can qualify for, you will have a much better idea of what to look at and what you need.

Closing the deal

Sellers typically like to work with buyers who are already approved for financing.

That way, there is not any kind of uncertainty with regards to whether they are going to be able to sell the house or not. They know that you can get the money and that you can actually deliver on your offer.

As a result, you can negotiate whether you want an early settlement or a late settlement.

There is nothing worse for a seller than someone who wants to buy a house but has to wait until their own house is sold first. Most sellers faced with multiple offers on the same property will take the money on the table.

Getting pre-approved for a mortgage with good interest rates makes a lot of sense for you and it makes things easier for all parties involved in the deal.

Tags: applying for a home loan