Let’s say you’ve finally found your dream home. You’re certain that no other property will ever check all your boxes, you make the home sellers an offer, and you apply for a mortgage. Then you get the bad news: no one will approve you for a loan of that amount!
How do you get preapproved for a mortgage?
You spent weeks (or even months) looking at homes that were outside your actual price range. Now you have to start over. Sounds like a nightmare, right? Fortunately, if you take the time to get preapproved for a mortgage, you can avoid this scenario. A preapproval allows you to determine how much money a lender will give you to buy a home. All it takes is verification of your income and assets, a credit check, and preliminary underwriting and you’ll get a preapproval letter outlining the loan amount, loan program, interest rate, and down payment you’re approved for. All home buyers should go through the preapproval process before they begin looking at available properties.
Once you’ve chosen a home, there can be thousands of dollars on the line between earnest money, inspections, and appraisals. If a mortgage lender hasn’t thoroughly vetted the buyer’s financial capabilities, all of that money could be at risk. Also, even if you think you have good credit, unknown blemishes on your credit report can happen. If your credit is pulled ahead of time and you understand your financial story, often times any blemishes can be resolved on-the-spot.