Mortgage Pre-Approval: Why It's a Good Idea
When you’re considering buying a home, a pre-approval should be at the top of your list of things to do to help you navigate the home-buying process in a more efficient way.
Smart home shoppers know that even before they start browsing for houses online or checking out open houses, having a pre-approval in hand is a great way to show sellers you are a serious buyer, which can put you ahead of the competition (and that is especially important in a hot real estate market).
If you’re considering financing your home, most mortgage lenders can issue a pre-approval after you go through the initial process.
What is a pre-approval vs. a prequalification?
It’s important to talk about the difference between pre-approvals and prequalifications. Despite what many people think, these are not the same thing, and it’s important to know the difference when you start the home-buying process.
With a prequalification, you’ll provide your lender with a self-reported overview of your financial situation. This typically includes a description of your income, assets, and debt. Your lender may run a credit check too. The lender will use this initial information to provide a best-guess estimate of your prequalification amount. If you’re just curious about what you might be able to afford, or you aren’t sure if you’re ready to buy, a prequalification could be a smart initial step.
A pre-approval is a more rigorous process, but it’s worth the extra effort if you’re serious about buying a home. Your lender will ask for a variety of financial documents, often including pay stubs, bank statements, tax returns, and more. They will also pull your credit report and analyze it. After reviewing your financial situation, your lender will issue a pre-approval for a specific loan amount. The pre-approval will also outline what your interest rate and monthly payment might look like based on the terms available at that time.
A pre-approval lets sellers know that you are ready, willing, and able to buy, and it often sets you apart from other buyers! It also gives you a clear picture of your potential housing costs, so it’s a great way to confirm what you can afford.
The bottom line
A pre-approval is a smart first step in getting you into your dream home! When you’re serious about buying a home or curious about how much house you might be pre-approved to buy, reach out to the Bellco Home Loans team! We would love to have a conversation about your options.
Who is Bellco Home Loans?
Bellco Home Loans is a collaboration between Bellco Credit Union and Cherry Creek Mortgage, an independent mortgage lender that’s been helping families attain home ownership for over 30 years. Bellco Home Loans was born from a desire to provide a premier mortgage experience for Bellco’s members by partnering with a leading, locally-owned mortgage company with an established reputation in the community.
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