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Should I Get Pre-Approved Before Looking For a House?
Yes, you should get pre-approved before looking for a home. No matter the stage you are in, a mortgage pre-approval is the first big step on your path to homeownership.
If you are in the early stages, pre-approvals give you invaluable information to use for budgeting and financial planning leading up to your purchase. This type of planning is especially helpful for renters thinking of breaking a lease to buy a house. If you are looking to buy sooner, your pre-approval will allow you to submit a serious offer once you find a home you love and speed up the mortgage process when you find a home you love.
Let’s look at what a pre-approval is and what it can help you do before looking for a new home.
What Exactly is a Mortgage Pre-Approval?
A mortgage pre-approval uses your verified credit score, income documentation, bank statements, and employment verification to approve you, as a buyer, to purchase a home.
Once pre-approved, you’ll receive an itemized estimate of interest rates, closing costs, monthly payments, and the maximum amount you’re approved to buy. This information is crucial to understanding how much you can borrow.
Be wary of lenders that suggest a pre-qualification because these are not the same as a pre-approval.
Learn more about how to get pre-approved for a mortgage.
What is the Difference Between Pre-Qualification and Pre-Approval?
A pre-qualification does not use verified information to approve you, whereas a pre-approval does.
Pre-qualifications use self-reported information and don’t take the additional steps to verify it. Pre-qualifications provide estimates rather than accurate numbers.
A pre-approval requires an actual credit check and supporting financial documentation, which gives a precise, customized quote for every home buyer.
Learn about the difference between pre-approval vs. pre-qualification.
4 Main Benefits of Getting Pre-Approved Before You House Hunt
There are lots of great reasons to get pre-approved, but here are the four main things that will help ensure you’ll be ready when the time comes to purchase a home:
1. Provides Accurate Credit Checks
Pre-approvals make a hard credit inquiry. This hard inquiry will accurately gauge your credit, unlike many free tools you might find online. If your credit qualifies, then you’re an approved buyer who can put in a serious offer on a home you love.
If your credit doesn’t qualify, you’ll know exactly why, and you’ll learn how to improve it. By getting approved early, you’ll have enough time to take the necessary steps to raise your score before putting in your offer.
2. Required to House Hunt
If you aren’t pre-approved, sellers and realtors won’t take your offer seriously. Pre-approvals are accurate assessments of your financial status that show you are ready to buy and can afford the property when you submit an offer.
Depending on where and when you are looking, you might also need a pre-approval to view houses.
3. Sets Your Budget Accurately
Pre-approvals don’t only show the maximum loan amount you get approved for. They also come with an itemized estimate of your interest rate, monthly payment, and closing costs.
This estimate lets you know how much down payment you need, if you need any at all, and will help you narrow down your budget, making it easier to choose what homes you want to see in person.
4. Shows How Much You Want to Borrow
Many buyers are pre-approved for more than they want to spend. And it’s important to know that you don’t need to borrow as much as you are pre-approved for.
A pre-approval will help you find a comfortable monthly payment that works for you.
How to Get Your Mortgage Pre-Approval
You can get pre-approved in a few minutes online, in person, or over the phone. All a mortgage lender will need to look at is:
- Your credit history
- Employment history
- Income verification
- Total assets
- Your desired down payment and mortgage amount
Homebuyer can do this for you in minutes by clicking below.
When Should You Get Pre-Approved?
You should get pre-approved as soon as possible. The earlier you get pre-approved, the easier it is to start viewing homes and make any changes to your finances to ensure that you’re ready to put in an offer.
Plus, all the information from your pre-approval can get used for your actual mortgage. By the time you’re pre-approved, you’re halfway through the mortgage process.
Does a Pre-Approval Affect Your Credit Score?
Yes, a pre-approval will run a hard credit check that will lower your credit score by five points or less. But as long as you keep paying your bills during that time, your credit score will return to normal.
Getting multiple pre-approvals shouldn’t hurt you if you shop for different lenders to get the best deal. Depending on the credit scoring model, you’ll have a shopping period of 14 to 45 days where similar inquiries are all counted as one and don’t affect your credit any further.
Learn more about how your pre-approval can affect your credit score.
How Long Does a Mortgage Pre-Approval Last?
Mortgage pre-approvals are typically good for 90 days. This is because lenders know your financial situation will change over time – everything from your credit score to interest rates will fluctuate.
If you haven’t found a home within that 90-day time frame, contact your mortgage expert, provide some updated information, and they’ll refresh your pre-approval for another 90 days.
Learn about how long your mortgage pre-approval is good for.
There are no downsides to getting pre-approved early. Going into the home buying process unprepared and uninformed is dangerous.
A pre-approval will go a long way towards helping you understand the information that is truly important to you for buying a home.