A pre-approved home loan is provided to qualified buyers with a solid financial history. It is, in essence, a home loan offer based on your creditworthiness. Potential borrowers may be eligible for such loans from financial institutions based on the fulfillment of a few pre-established terms and conditions.
The bank has already looked at your financial history before making you an offer. For example, if you have direct deposit set up on your account, the bank/credit union will know how much money you make and will likely see how much you spend.
However, the pre-approval doesn’t mean that an offer will be made. It’s just an indicator of whether or not you can get a loan.
For your home loan to be formally approved, your bank has to run errands to make sure you are who you say you are and that your finances are in order. They also have to check out the property you want to buy. Even though there is no way to know for sure what the final offer will be, having a pre-approved home loan has its benefits and gives the borrower an edge when negotiating.
A pre-approved home loan can be very appealing to the borrower because it has a lot of good things about it. Let’s figure out why!
The Advantages Of Home Loan Pre-Approval
- Better Chance Of Making A Deal With The Lender
Since the bank/credit union has already given you pre-approval for your home loan, you will have the power to negotiate with the lender. When you have a letter of “sanction” from the bank/credit union, it makes it easier to talk to them about the purchase. Also, you might be offered competitive interest rates from the lender even before you talk to them.
This is because the bank/credit union feels confident about your finances and your ability to pay back the loan, and general inquiries are less likely to lead to a sale than actual buyers. Along with potentially lower interest rates, you may have more flexibility in your terms to pay back the loan, which makes the EMIs easier on your budget.
- It Lets You Know How Much You Can Spend
When you’re looking for a house, one of the most frustrating things that could happen is that you find one you really like but then find out you can’t afford it. It can be sad and feel like time was wasted. But if you have a home loan that has already been pre-approved, you’ll know exactly how much you can spend. This saves you a lot of time and keeps you from being disappointed as you’ll be able to narrow down your choices quickly based on your budget.
- Getting Pre-Approval Lets You Move More Quickly
It can be hard to find the right place to live, especially if there are more than one of you to please. So, you don’t want to miss out on the right home because it took too long to get your finances in order. You can speed up the process of buying a home with a pre-approved loan because you can make an offer on a property faster. This keeps your dream home from going to someone else.
- It Makes It Easier To Make Deals
When you know how much you can spend, you’ll feel better about talking to sellers. If you have a loan that has already been approved, the seller or their agent will know that you are a serious buyer. This will not only speed up the process of selling, but it will also make it easier for you to negotiate the terms and price of the property. For example, if you ask the seller to lower the price of the property, they’ll be more likely to do so if they know how much you can pay and that you’re serious about buying it as soon as possible.
- Getting Pre-Approved For A Loan Gives You Peace Of Mind
With a pre-approved loan, a big part of the application process has already been taken care of, so you won’t have to worry about as much afterward. This makes the settlement process faster and easier for you.
What Should I Know About Pre-approval For A Loan?
Now that you know what it means to have your loan pre-approved, it’s important to find out as much as you can.
For one, some lenders might only give pre-approvals based on information submitted online through their software. This means that a “human credit assessor” has not picked up your application to look over all your documents. This process means that when you go to finalize the pre-approval, they can still turn down your application for a home loan based on something they found when they looked at all of the documents you submitted. If you go to a lender who will properly evaluate your pre-approval, you won’t have to worry about getting more things for the bank/credit union once you’ve found a property you like.
Another important thing to remember is that pre-approvals for home loans are only good for a certain amount of time, usually 3 months, but you should sheck with your financial institution. If you’re having trouble finding a home to buy, you might have to reapply for the loan. During this step, the lender will probably look at your finances to make sure you can still pay for the loan you were already pre-approved for. Whether or not any changes to your job or savings will affect your pre-approval will depend on your current financial situation.
For many people who need a loan to buy a home, a pre-approved offer is the best choice because it alleviates much of the risk involved in the home buying process.
Among the many benefits, the best one is that you know more about your home loan eligibility and how much you can spend. This not only guarantees that you’ll get your home in the current market, but also makes you a very trustworthy buyer that sellers will take seriously and make a deal with. If you are looking to reap all advantages of home loan pre-approval, get it from a reliable credit union like Heritage Financial Credit Union.