When you’re ready to purchase your dream home, start with a pre-approval.
Why is it important to obtain a pre-approval?
Entering into a real estate transaction without a pre-approval can be very discouraging. While every scenario is unique, there are all too many cases where buyers are left broken-hearted after making an offer on a property, only to find out that they won’t be able to obtain financial approval for their offered amount. Instead of losing the home or deal of your dreams, it’s best to take care of your approval before you start searching.
A pre-approval shows a seller that you’re serious. It let’s them know that you’re ready to negotiate, and that you’re looking to make a decision soon. Offers without pre-approvals are often not considered, and, it severely compromises your ability to negotiate.
A pre-approval also let’s you know what you can afford. Sometimes, it’s easy to get ahead of ourselves and dream of the million dollar penthouse; a pre-approval will force you to look within your budget, or, wait until you’ve saved up for a larger down payment.
Finally, a pre-approval can lock in an interest rate for a certain period of time, so if rates go up, you’re still entitled to the quoted rate.
Where do you go for your pre-approval?
Start with your current financial institutions; since you already have a relationship with them they’ll be more likely to approve you for better rates. Then shop around; you’ll want to get a feel for what others are offering, it also helps give you leverage when you negotiate. You’re going to visit multiple properties, and negotiate on the price of your home; the same strategy should be used for your mortgage. Even a few tenths of a percent in interest can shave off a hundred dollars or more on your mortgage payments.
A pre approval is generally good for 1-3 months (depending on the lender), and sometimes banks offer incentives to earn your business like notary fees etc.. be sure to discuss these promotions with your broker to ensure you get the best deal possible!
It is important to always remember that a pre-approval is not the same as a final approval; should there be any changes to your job or financial status it could compromise your approval.