One of the most important—and complicated—steps that homebuyers must make is applying for a mortgage.
A mortgage is a legal agreement regarding the home loan. It assures the bank, or any other lender, that the homeowner will repay their loan.
Applying for a mortgage is a big step. And NBC News recently reported that obtaining a pre-approval is one of the six things buyers should do before purchasing a home. So, what is pre-approval? And why is it important?
How does pre-approval work?
Homebuyers can obtain a pre-approval when they have a loan officer review their finances. The officer will check the homebuyer's credit score, as well as the:
- Assets they own
- Other debts they owe
- History of employment
Essentially, the officer reviews finances to determine whether or not the homebuyer has the ability to repay the loan.
A pre-approval is not a guarantee for a mortgage
Receiving a letter of pre-approval does not automatically qualify a homebuyer to get a mortgage. However, it does have many benefits for homebuyers. Obtaining pre-approval demonstrates:
- The buyer's integrity to the seller
- That buyers are already working with lenders
Even though it does not guarantee homebuyers a mortgage, getting pre-approved can make the process of hunting for their dream home easier. It also increases the chances that they will receive approval for their home loan.
So, is it worth it?
Nowadays, most property sellers in New York and across the country look for a pre-approved mortgage. It is just another level of security on both sides of the transaction. Pre-approval provides proof that homebuyers mean serious business when they approach a real estate transaction.