When you begin your search for a home, whether you’re a first-time homebuyer or not, there are important steps to take to ensure you find a home that you love, but also one that fits within your budget. Far too many times, people look for home’s out of their price range, setting themselves up for failure.
In order to avoid making this all too common mistake, getting pre-approved for a mortgage will set the framework for finding your dream home, while staying within a reasonable price range. Getting prequalified will not only let you know what you can afford, but it will also deter your real estate agent from showing you homes that are clearly out of your budget. After all, there is nothing more disheartening then finding your ideal house, only to learn that you cannot afford it.
As a buyer, getting pre-approved for a mortgage will give you a “leg up” on the competition. By this I mean, in the market such that it is these days, a sellers’ market, the pre-approval gives buyer’s the opportunity to know what they can afford and what offer they can make. It’s no secret a seller will accept an offer of a pre-approved amount, before they will accept an offer that has no backing.
In a recent article, Fox Business outlined the necessary steps to take to be pre-approved for a mortgage. First and foremost, make sure your credit score is more than satisfactory. Credit history and credit score are a key factor in getting loan approval.
In fact, “having delinquent payments in the past six to 12 months and a score lower than 680 can lessen an applicant’s chances of getting preapproved,” according to the article and Ken Inadomi, who is the executive director of the New York Mortgage Coalition.
It is also recommended that borrowers keep close watch on their credit and take care of any discrepancies immediately. Additionally, if you know you will be searching for a home, it is not a smart move to take out new credit in the few months preceding the pre-approval.
When it comes down to it, being pre-approved for a mortgage is the safest, and the most efficient way to place an offer on a home. This pre-approval is insurance, and a guideline to follow when looking at potential homes and placing offers.
*Image courtesy of The Michigan Mortgage Calculator