Why Getting Pre-Approved is So Important

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Getting pre-approved for a loan is the first step in the home buying process.  It is also something that sometimes I have a hard time getting people to do.  Many people feel they know what they can afford and know how much a certain house is going to cost them.  When my wife and I were looking for a home we learned while being pre-approved that we could not use her income to qualify.  The reason was not because she had bad credit but because she had no credit at all.  It took six months for us to establish a credit score for her and shortly after we were able to purchase a home.  The truth is that the lending industry changes daily.  I take that back, it can change by the minute.  One change taking place right now is that mortgage insurance is almost doubling on FHA loans.  This can cost a borrower hundreds of dollars more a month.

By getting pre-approved you and your realtor will know exactly how much you can afford.  You also will learn about all fees associated with a home purchase and will know what your monthly payment will be.  In addition to this your pre-approval letter will make your offer a much stronger offer because the seller will know that you can in fact afford the house.  Personally I would never recommend that one of my sellers accept an offer without a pre-approval letter.  I would also like to see the pre-approval letter be from a local lender who preferably does their own underwriting.  It is much easier doing business with people in town  then calling someone four states away who doesn't even know who you are.