Why Having A Mortgage Preapproval Is Important

by Khaleef "Fat Guy" Crumbley on April 6, 2012

in Finance

Mortgage Preapproval

There are many reasons why we haven’t purchased a home as of yet. For one, we are still in debt bondage. In fact, since we have a long way to go before we can pay off debt in full, we won’t try to purchase a house for a long time (if ever).

However, if and when the time comes for us to buy a home, we will definitely get pre-approved for a mortgage (or just buy with cash ;-))!

There are several benefits to having a pre-approved mortgage when you are shopping for a home. Here are a few…

A Mortgage Preapproval Can Narrow Down Your Options

By already knowing what you can afford, you can save yourself wasted time and aggravation that comes from looking at homes which are not in your price range. This is not only true when it comes to looking at particular types of homes – condos, townhouses, single-family, multi-family, etc – but it is also helpful for deciding on a neighborhood.

Actually, you will probably have to consider both location and dwelling type when looking for a home. Knowing how much you can borrow beforehand can help you make this decision. You may find that a condo in one city costs the same as a single-family home in another.

One way to do this without visiting a bank is to go online to get a preliminary figure (or range). You can use a tool such as a mortgage calculator while you are waiting for more official numbers from your bank. That way, even your “window shopping” can be more fruitful and targeted.

You Can Focus On The Details

By giving yourself less homes to evaluate, you can give yourself more time to pay attention to the small details, which may have gone overlooked if you had a larger list of potential homes.

Even when we looked for apartments each Spring over the last 6 years, we realized that you glossed over a lot of details while rushing from place to place. It wasn’t until we went back to the places which made the cut that we started to notice the dead stinkbugs in the window, or the lack of a linen closet, or the myriad of other things that can escape a first glace. Focusing on these details even helped us to save money on moving costs!

You can avoid glossing over these details if you only have a small list of places to visit. Ultimately, this will save you time, and it can also preventing you from making a hasty decision that you will regret for the next 30 years.

You Can Increase Your Bargaining Power

When compared with someone who hasn’t been pre-approved for a loan, you are definitely going to be taken more seriously. Both sellers and real estate brokers are going to understand that you are a serious buyer, and not just some couple killing time on a nice afternoon by going to an open house (yes, we’ve done that in the past :oops: ).

Once you state that you have been pre-approved, they will understand that your financial situation has already been examined and one or more mortgage lenders want to make you a loan. A seller would be more likely to accept your first offer, even if it is below the asking price, since they know that accepting it will mean that they can take their house off of the market and move on with their life!

Hopefully, when/if it becomes time for us to buy a home (if we need a mortgage) there will still be a large number of people who fail to get pre-approved for a mortgage. That way we’ll have a competitive advantage ;-).

This post brought to you by http://www.emortgagecalculator.co.uk.

photo by renjith krishnan

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krantcents April 8, 2012 at 2:50 pm

I think the preapproval is a given. How would you know how much the bank will give you if you didn’t get it?

Mortgage Calculator April 9, 2012 at 7:27 pm

Great Article!

My wife and I were pre-approved and it was nice knowing exactly what we could work with. Of course, I also decided that the mortgage could be no more than 3 times my annual income.

Those restrictions made it quite clear what we could afford to buy, and it demonstrated to everyone we dealt with that we were ready, willing, and serious about buying.

(yes, we did go to open houses in the past, but that was called “browsing”) (shifty eyes).

Thanks,
Timothy

Squirrelers April 10, 2012 at 8:38 pm

It’s important one way another to know how much you can spend on a home. Then, go way under that amount when buying. Better to be conservative with liabilities!

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