Importance of mortgage pre-approvals or simply being ready.
Tuesday Sep 08th, 2015Share
Do I really need to get a mortgage pre-approval before I start looking for my dream property? This is the most frequent question I receive from buyers (especially, the first time buyers) during our first interview. Below is my opinion based on my own experience and it cannot be relied upon when making your financial decisions. I highly recommend everyone to talk to a mortgage specialist about your particular situation and for more professionally detailed advice.
As a professional Realtor, I recommend my clients to be prepared for a property search in advance and get a mortgage pre-approval.
First of all, we're still in the seller's market (where demand exceeds supply), and I can't emphasize how it is important to know your maximum price limit when you submit your offer. It's especially integral to know for a property that attracted multiple offers. Just imagine losing your dream property to another better prepared buyer just because you weren't sure what you can really afford.
Or imagine a situation when you fell in love with a house and overbid everyone else including your own financial abilities. If you used a professional realtor who protected your interests and did make an offer conditional on obtaining financing, you're most likely fine and will just walk away from your dream house. However, if something went wrong and someone forgot or insisted on not putting any conditions so sellers would be inclined to accept unconditional offer. Well, you're in a big trouble because you did sign a legal contract and you must abide by all its terms and conditions. It's better to talk to a professional lawyer about consequences.
I believe preparing yourself well in advance can also save you time and nerves. Nevertheless, a mortgage pre-approval is not a guarantee that your mortgage application will be accepted when you find your property, it just speeds up the process and gives you an idea of your affordability. The process becomes easier if your financial situation has not been changed from the time of obtaining pre-approval until the actual closing.
It's important to know that not all pre-approvals are created equal and some are the mere pre-qualifications. In this case, a mortgage specialist will discuss your financial situation without asking you to submit any necessary financial documentation and will let you know what you may or may not afford based on this discussion. Basically, you will get a rough idea of what your price limitation is. Please do keep in mind that this is just a discussion. You do risk being denied a mortgage after your offer gets accepted, if you have not obtained a mortgage pre-approval for which a mortgage specialist would verify your financial information upfront.
It's also important to know that the amount you are pre-approved for is usually at the high range of what you could qualify for later on. I highly recommend to look for a property with a price based on your actual financial abilities and anticipated increase in future expenses. Be realistic of your financial situation and you will positively enjoy being a homeowner.
Thank you for reading and your comments will be appreciated.