A mortgage pre-approval is only there so that you're better prepared and ready when you do find that dream home. It's best to get one sooner rather than later, though, as you get deeper into your search. Let's look into the pre-approval process.
A pre-approval letter from your lender is a document that states they're willing to give you a loan of a certain amount of money. It is a stamp of approval that says you have good credit and are in a secure financial position to buy a house. Not only does it let you breathe easier when looking, but also your real estate agent and sellers. They will know that you mean business.
While a pre-approval letter isn't a binding contract, it does allow you to move faster when you're ready to buy a house. You can make an offer immediately, whereas buyers without one potentially lose opportunities while waiting for their approval.
To get a pre-approval letter, you will work with your lender to submit a mortgage application. They will go over all of your financial documents and verify that you are indeed in good standing. Once you're approved, you will receive your letter from your lender. You will have about 60-90 days to use this money.
We know that being pre-approved will make the house-hunting process easier. Real estate agents will know you're serious, you may be able to see more homes, and you can make offers immediately once you have found the one you love. Here are a few more ways a pre-approval letter can be helpful.
Like anything in life, there are a few potential cons if pre-approved too early.
You do not have to have a letter of pre-approval to work with most real estate companies. However, some prefer it and might require that you do. Here's why:
It's best to research which real estate agent you would like to work with and see their policy on being pre-approved. You want to be upfront and honest to ensure a smooth working relationship, so they know if you won't pre-approved before looking.
Do remember, though, that getting pre-approved will for sure speed up your process of moving into a new home. Getting pre-approved can take one to several days, so it's best to be ready to pounce if you're looking to move quickly.
All in all, being pre-approved seems to outweigh (quite a bit) not being pre-approved. Think of the pre-approval letter like a VIP ticket to cut a very long line. Real estate agents and sellers both respond well to it. Most importantly, you, the potential buyer, will respond well to it. Being pre-approved allows you to understand all of your finances and what you can honestly afford and honestly cannot. It narrows down the search, making for faster and more efficient house-hunting. When it's time to make the offer, you will be way ahead of the game.