There are many advantages of pre-approvals for active home shoppers. Here are some common questions and answers about pre-approvals.
What are the Advantages of Pre-Approvals?
A pre-approval will tell you how much a lender is willing to lend you. If you are shopping for a home, it’s important to know your price range early in the game. If you know what you can afford, you won’t needlessly shop for homes out of your price range. Being comfortable with your limits will help you negotiate a home purchase with confidence. Plus, since sellers like a sure thing, you’ll have an advantage over buyers who may not have been through the pre-approval process.
Why Should I Be Pre-Approved for a Mortgage Loan?
A pre-approval takes your income, credit and assets into account. By engaging in the pre-approval process, you can uncover any potential financing issues early in the process. It’s better to know that there are issues to be handled before you get your heart set on a specific home. On the bright side, you might not have any issues to overcome and you will be able to truly enjoy the home shopping process.
How Long is the Pre-Approval Valid?
Your pre-approval is typically good for the “shelf life” of the documents used to create it. These will include a credit report, pay stubs, bank statements, W2s, tax returns, etc. The usable life of these documents will vary, yet it’s usually safe to say that your approval is good for approximately three months. During this time, it pays to file all important financial documents so they’re readily available for future updates.
What if I Change My Mind?
That’s perfectly fine. There’s no obligation to purchase a home or use a particular loan program once you’ve been pre-approved. On the flip side, a pre-approval is not a contract and provides no guarantee of a loan approval. Usually, a loan approval is contingent on a home appraisal and a thorough review by mortgage underwriters.