by Shreekant Rao
Published Thu, Jan 26th 2017, 14:13 | Finance
WHAT IS PREAPPROVAL:
Preapproval allows a lender to review your credit profile to determine if you are financial fit to purchase a home. Your credit profile exists of the following items:
Credit report: Your credit score and credit history. Does your credit history reflect positive or timely payments?
Employment/Income stability: Does your employment history reflect stability? Where are you at in your career and can your income support a mortgage payment plus existing obligations – vehicle loans, Loan for Home, and credit card payments?
Assets: Do you have funds set aside for a down payment and closing costs? Do you have any reserves such as retirement or additional savings?
UNDERSTANDING YOUR PRICE RANGE:
If you are confident in your budget and what you can afford, finding the perfect home will be a much easier process. The purchase of a home is a big investment and it’s important to know what your budget can afford. Have you considered the expenses that come along with owning a home – property taxes, home owner’s insurance, lawn mower, etc…? There is nothing worse than falling in love with a home but realizing it is out of your price range. Taking a look at your spending habits will help you determine a price range you should stick to when searching for a home.
BUYING POWER:
Having a mortgage preapproval letter in hand will assist you in being quick to jump on a home that comes up for sale. Especially in today’s market, homes sell fast and you could lose out on an opportunity if you don’t have your financing figured out prior to your search. Many Real Estate Agents do now require a preapproval letter prior to even showing a home.
NEGOTIATION ABILITY:
Having preapproval prior to your home search will also give you greater negotiating power. If you have gone through the steps of preapproval, you understand your budget and are able make better negotiating decisions – terms, pricing, seller paid fees, etc...
Not only is preapproval important when seriously considering the purchase of a home, going through an application with a loan officer will help you determine what steps you need to take in order to be preapproved for a home loan in the future. Apply here if you are interested in starting an application to seek preapproval for a home loan.
[Source: https://www.southpointfinancial.com/component/easyblog/entry/why-is-it-important-to-get-preapproved-for-a-home-loan?Itemid=74]