If you are considering the purchase of a new home or are first time buyers, getting pre-qualified before you begin your search is a very wise first step.
The pre-approval process involves submitting a loan application and supporting financial documentation to a potential mortgage lender. The lender reviews all of your financial history and determines if your credit background is worthy of a mortgage loan, and how much you are eligible to borrow. If approved, the lender agrees to give you a loan subject to you finding an acceptable property. Once the property is located, the lender will want an appraisal and title review.
Being pre-approved for a mortgage has its advantages. It saves time when applying for a loan because all the paperwork has been assembled. It also establishes how much you can borrow, so you don't waste time looking at properties you can't afford. Since most mortgage lenders will guarantee the current interest rate for 60 - 90 days, you don't have to worry about rising interest rates while shopping for a home. Finally, homebuyers who are prep-approved are in a better bargaining position when making an offer on a home, because sellers can feel confident about their creditworthiness.
Many financial institutions are competing for your business so it makes sense to shop around for a mortgage. Most lenders are willing to reduce their posted interest rate so don't be shy about bargaining.
Before approaching lenders, it’s a good idea to prepare a package of the financial information they’ll require. This not only saves time, but it leaves an impression with the lender that you are a serious buyer.
Here are a few things your lender will want to see:
Pre-approval is the next best thing to a loan commitment. Once your application has been approved, you will know how much you can borrow and you will be ready to start searching for a home. Your local financial institution will be able to provide you with more information on pre-approvals. Or ask a mortgage broker to help you find a lender and the best mortgage package for your financial needs.