Mortgage Pre-Approval: The Key to Success in Buying a New Home

Have you ever gone to the grocery store without your wallet? Probably not! So why would you start house hunting without even knowing how much you can afford? While there’s nothing wrong with exploring new homes, house hunting before you have mortgage pre-approval is sort of like going to the grocery store without cash or a credit card. If you’re serious about turning your dream of buying a new home into reality, getting a mortgage pre-approval is a great first step you can take.. Let’s learn about what it means to get pre-approved for a mortgage and how you can easily get the process started with NewHomesMate (powered by Morty) today.

What Is Mortgage Pre-Approval?

A mortgage pre-approval is a statement from a lender that indicates how much money they would be willing to lend you to buy a home and at what interest rate. Before providing pre-approval, a lender will look at your current income, assets, debts, and credit score to determine your financial position and your ability to repay a mortgage.

Why Do I Need Pre-Approval?

Whether you’re in the market for a new or resale home, getting mortgage pre-approval early on in the homebuying process offers you many advantages:

• It gives you a sense of how much you can afford - House hunting is all fun and games until you have an idea of the monthly repayments you can qualify for. Once you have mortgage pre-approval, you can establish a realistic price range to guide you in your home search.
• It proves that you’re a serious buyer - Getting mortgage pre-approval is an excellent way to set yourself up for success when you finally find your new dream home. A pre-approval shows a seller that you’re financially prepared to buy. This is especially important when you’re buying a new construction home since many builders and developers require a pre-approval and proof of funds to guarantee a purchase.
• It will uncover any financial or credit issues - There’s nothing more disappointing than finding a house you love and then learning that you cannot get approved for a loan. Applying for pre-approval early on will uncover any financial or credit issues that may prevent you from getting a mortgage so that you can work to resolve them well before you set your heart on a new home.

Keep in mind that a pre-approval isn’t everything when it comes to buying a new home, and it may not always be the best representation of what you can truly afford, since it looks at your gross income rather than net. Be sure to evaluate your entire financial profile to determine a budget that makes sense for you.

What is the Difference Between Mortgage Pre-Qualification and Pre-Approval?

Both mortgage pre-qualification and pre-approval provide information on how much money you can borrow to buy a new home, but they differ in terms of how accurately they evaluate your financial situation. To provide mortgage pre-qualification, a lender will likely ask you to provide estimates of your income, assets, debts, and credit score. They will not actually verify any of these numbers to provide their estimate of what you might be able to borrow. Pre-approval, on the other hand, requires a hard credit check, as well as income and asset verification. This provides a more accurate estimate of what you can borrow, as well as reliable evidence that you are a qualified homebuyer.

Once you get your pre-approval confirmation, you will be ready to shop confidently for your new home. You’ll know exactly how much you can afford to spend and you’ll have a pre-approval letter to show that you’re a serious and qualified homebuyer.