Buying your first home is one of the most exciting times of your life. Many people spend years saving to buy their first home. According to CNBC, the average renter saves for 6 ½ years to afford the down payment.
When you have saved enough for the down payment, it is best to get a preapproved mortgage before you start looking at houses. There are several reasons why it is essential to get preapproved first.
#1 A Preapproval Is Better Than a Pre-Qualification
Being pre-qualified is better than getting preapproved. A pre-qualification can help you determine how much you can afford to spend on a house; however, your ability to purchase will be in question. When you are preapproved, the lender will check your credit and verify your documentation so you can be preapproved before you start house hunting.
#2 You Will Know What You Can Afford
When buying a house, you need to be sure you can afford the house you choose and make the mortgage payments on time. You would be surprised by the number of people who buy a home they can afford. According to CNN Money, 39 million families pay more for their homes than they can afford, and you don’t want to be one of them. If you can’t afford the payments, you could end up dealing with a foreclosure.
The best way to avoid making this mistake is to get a preapproved mortgage. Your lender will let you know how much you can realistically afford, which can save time when you start house hunting. Knowing exactly what you can afford will help you narrow down your options, and you won’t waste your time looking at houses outside of your price range. In addition, you can save yourself disappointment when you find out you can’t afford a house you fall in love with.
#3 The Seller Will Take You Seriously
Most homes on the market attract more than one interested buyer. If you want the best chance of the seller accepting your offer, you should get a preapproved mortgage first. If the seller is weighing the offers, your preapproval letter will show them that you can afford the home, and your mortgage will be approved.
#4 A Preapproval Can Save Time
Getting a mortgage is a lengthy process, and the longer it takes for the mortgage to go through, the longer it will be before you can move into your new home. If you get preapproved ahead of time, part of the work is done. This will allow you to get from the contract process to the closing much sooner, allowing you to enjoy your new home sooner.
#5 Many Agents Won’t Work With You Without a Preapproval Letter
When you hire an agent to help you find your new home, they will spend countless hours searching for properties you will be interested in and showing you the homes. The last thing they want is to find out that you don’t qualify for the money you need because the time they spent working with you will be for nothing.
To prevent this from happening, most agents require you to get a preapproved mortgage first, ensuring you can afford the homes they plan to show you. Buying a home is a huge step, and you want to be sure you aren’t getting into something you can’t handle, which is why you need a preapproved mortgage. If you get preapproved first, you can be sure you can afford the house of your dreams, preventing serious problems later.