During the mortgage pre-approval process, a mortgage lender will review your financial situation to determine whether or not you’re qualified for a loan. If you do appear to be qualified, they’ll also give you a maximum amount they are willing to lend. It’s a worthwhile process for several reasons.
Here are the three main benefits of getting pre-approved for a home loan, before you start shopping for a house.
#1 You can identify problems early on in the process.
Our local lenders can uncover a lot of potential problems during the mortgage pre-approval process. Maybe your debt levels are too high in relation to your income. Maybe your credit score is too low. The sooner you can find out about these things, the better. It gives you more time to correct them. Without this process, you could spend days or weeks shopping for a home only to find out you’re not qualified for a loan. That’s a waste of time and energy. Identify problems early, and then work on correcting them. This is the sensible approach. It’s also one of the key benefits of getting pre-approved.
#2 It helps you narrow down the house-hunting process.
Imagine this: You spend three weeks looking at homes in the $300,000 price range. You look at them online and also by driving through neighborhoods. Then you find a Midcoast Maine home that is perfect for you. So you approach a mortgage lender to apply for a loan. The lender says they’re willing to lend you $225,000 — max. This can’t be right, can it? So you speak to three other lenders, and they all give you similar numbers. You’ve just wasted a lot of time by shopping in the wrong price range. This is another area where mortgage pre-approval benefits you, as a home buyer. Granted, your own personal budget is the most important spending limit to keep in mind. But it also helps to know what the lender is willing to lend you. That way, you can limit your house-hunting process to the types of homes you can actually afford to buy.
#3 Sellers and their listing agents will take you seriously.
This piggybacks on what we just talked about. If you try to schedule a showing to see a home, the listing agent will probably ask if you’ve been pre-approved by a lender (or if you have some other form of financing lined up). They would rather deal with buyers who have been pre-approved, because it indicates there’s a good chance they’ll get financing. Now imagine a scenario where the seller gets two offers — one from a buyer who has been pre-approved, and one from a buyer who has not. The second buyer is an unknown variable, where financing is concerned. Which offer do you think the seller would accept? Which one would you accept?
We have many wonderful local banks and lenders here in Midcoast Maine who are familiar with our real estate market and loan products that may be unique to Maine or our region. If you would like a personalized referral to a lender, please contact us.