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Why Get Pre-Approved for a Mortgage Early

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When you’re making a big decision in life, it’s usually best to iron out the details ahead of time. If you’re starting a new job, you want to sign the contract before you start thinking about how to decorate your office. If you’re moving across the country, you want to find a place to live before you load up the moving van. And if you’re looking to buy a house, you want to get pre-approved before you start the search.

But what exactly does pre-approval mean, and how does it affect the home buying process? Read ahead to find out.

What Does Pre-Approval Mean?

Pre-approval is a term used by the mortgage industry to describe the initial process of qualifying for a mortgage. When a buyer is pre-approved, it means a lender has agreed to let them borrow up to a certain amount for a home.

To get pre-approved, the borrower needs to submit basic financial information and provide access to their credit report. Pre-approval results in a hard inquiry on a credit report, so consumers shouldn’t go this route unless they’re seriously interested in buying a house right now. Thankfully, this won’t negatively affect your score too much if you already have a solid credit history.

The pre-approval offer from a lender usually lasts between 90 and 120 days, which should be enough time to find a home. If you need more time, the lender can extend the offer – but it will cause another hard inquiry on your credit report.

Why You Should Get Pre-Approved Early

Pre-approval shows how much a lender is willing to give. If you start home shopping before finish the pre-approval process, you could get a nasty surprise when you apply for a mortgage and discover you qualify for much less.

If you’re in a competitive housing market, you should do all you can to stand out in a sea of borrowers. Getting pre-approved is one way to do this, because it shows how serious you are about buying. It means a bank has already verified your information, and you’ve already started the mortgage process.

Sellers will be more likely to accept an offer when you’re pre-approved, because it means there will be fewer issues finalizing the mortgage. The last thing an anxious homeowner wants is a hold-up because their buyer has a spotty employment history. Some realtors won’t even work with a borrower until they’ve been pre-approved, because they don’t want to waste their time with a casual shopper.

Being pre-approved first can also help you find out about any potential issues before you go under contract with a home, like an error on your credit report. It’s better to deal with this during pre-approval than when you’ve already found a home.

Thankfully, pre-approval can sometimes take as little as 24 hours if all your documents are in line and your information checks out. When you’re self-employed, pre-approval can take longer. Lenders need more time to verify your income and often need additional proof, like bank statements, canceled checks, and 1099s.

Conquer your student debt. Refinance now.

Get My Rate

Conquer your student debt. Refinance now.

Get My Rate
Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.