• Ron Goldan | 908.253.9700

What is a Pre-Approval and Why Do You Need It

As you begin your search for a new home, you will likely find yourself asking several questions: Do I need a realtor? Where are the best schools? Do I want to live in the city or the country? You may also find yourself asking questions about pre-approval, mainly whether or not you need it. The answer? It’s almost always yes.


What is Pre-Approval?


Per Realty Times, pre-approval is a simple process that provides you with an estimate of the home loan amount for which you may qualify. It does this by taking into account the financial information you supply or they order, namely your credit history, salary, and debt-to-income ratio. Pre-approval may involve procuring your tax information, your pay stubs, and your bank statements.


Being pre-approved doesn’t give you a guarantee that a lender will definitely offer you financing, but it greatly improves your odds. The reason it doesn’t guarantee it is because property-specific details (such as the appraisal of your existing home) aren’t taken into consideration. Still, obtaining pre-approval is smart, and something that makes you much more enticing to a lender.


How Pre-Approval Benefits You


There are a handful of reasons pre-approval benefits you as a prospective home buyer – minimizing your stress, decreasing the odds that you won’t qualify for financing, and understanding your credit are all perks. But, the largest benefit has to do with the fact that pre-approval automatically tells you what you can (and cannot) afford. This, in itself, offers its own handful of perks.


By knowing the home loan amount that you qualify for (even knowing merely the ballpark), you take away three huge elements of the typical realty search: wasting time, getting frustrated, and being disappointed.


Pre-approval saves you from wasting time because it zones you in on the houses that are fiscally right for you – it removes the ones that are too expensive from the equation and prevents you from attending their open houses, researching their histories on the internet, and possibly even attempting to put down an offer.


All of this also prevents frustration and disappointment: the last thing you want to do is fall in love with your dream house only to realize it requires a loan for which you simply don’t qualify.


Gaining pre-approval can also assure that you don’t aim too low, buying a not-so-great home because you mistakenly believe that’s all you can afford.


By getting pre-approved, your housing search is realistic, which ultimately protects your finances, your time, and your happiness. It takes the stress out of what is typically a very stressful situation.


Contact Summit Financial Mortgage today to talk to a lending specialist and learn more about the pre-approval process.