Things to know about mortgage pre-approval when buying a Howard County home for sale
Most buyers finance their home deal with a mortgage when they buy a home for sale in Howard County, Maryland. If you are also taking out a mortgage, how to get pre-approved is one of the most important things you should know.
A mortgage pre-approval letter is a guarantee from a lender that it’s willing to finance your home purchase up to a certain dollar amount, based on financial info you’ve shared with it, such as your pay stubs and tax returns. Pre-approval should not be confused with pre-qualification.
Pre-qualification is simply a basic assessment of how much loan you can be approved. Your lender will not scrutinize your income and tax statements before providing you with a pre-qualification letter. So you can get pre-qualified within minutes of walking into a bank, but it may take a lender up to a week to get you a pre-approval letter. The dollar amount of your loan specified in a pre-qualification letter may be different from that in a pre-approval letter.
Why you should get pre-approved
- You will know how much loan you will be approved once you get a pre-approval letter. You can determine your budget accordingly. You will not waste your time, energy, emotion and money on looking at properties which are not in your budget.
- The seller will take your offer seriously. A pre-approval letter will put the seller at ease since he or she will know that your financing will come through. If you don’t have a pre-approval letter, your offer will most likely include a financing contingency, which binds you to this deal only if you can secure a mortgage. Such contingencies make sellers wary and are less likely to agree to your offer.
- If you are buying in a seller’s market, a pre-approval letter can give you an edge over other buyers who are not pre-approved and help you win bidding wars.
- You will know ahead of time if there are any issues with your credit report. You can avoid last minute surprises by getting credit rating agencies to correct any inconsistencies in the credit report.
Conclusion
Unless you are paying in cash, you should always get a pre-approval letter from your lender. There are no downsides—all upsides and many benefits—to getting this helpful letter in hand.